Co-operative banks in Kerala reel under bad loans, NPAs crossed 38% at end of last year

As per figures released by the State Level Bankers’ Committee (SLBC), as much as 88 per cent of advances of Kerala State Cooperative Agricultural and Rural Development Bank Ltd were NPAs, while the figure stood at 30 per cent for Kerala State Cooperative Bank (KSCB), also known as Kerala Bank, that includes 13 district cooperative banks under it.

By way of comparison, commercial banks including PSU banks and private sector banks reported NPAs of just 3.99 per cent of their total advances as of December 2021, the SLBC figures show.

Both Kerala Bank president Gopi Kottamurickal and vice-president M K Kannan are CPM leaders.

While Kerala Bank had accumulated NPAs of Rs 12,403 crore as of December 2021, against advances of Rs 41,544 crore, Kerala State Cooperative Agricultural and Rural Development Bank Ltd — including primary cooperative agriculture and rural development banks — had bad loans amounting to as much as Rs 6,990.74 crore against Rs 7,954.73 crore of advances.

Together, the cooperative banks — including KSCB and Kerala State Cooperative Agricultural and Rural Development Bank — reported NPAs of Rs 20,324 crore, against Rs 53,032 crore of loans.

A banking source noted that 38 per cent of bad loans in the system are very high and unsustainable. “Such a high level of bad loans would have forced the RBI to bring the entity under the prompt corrective action (PCA) framework applicable to commercial banks,” the source said.

The merger of the district cooperative banks with Kerala State Cooperative Bank – rebranded as Kerala Bank – took place starting November 29, 2019. While the LDF controls most of the cooperative banks, the UDF led by the Congress runs others.
A banking source said this lay at the heart of the problem. “There is widespread interference in loan sanctions and disbursals by party workers. Recovery levels are very low.”

A loan account is considered an NPA when the principal or interest on it has been overdue for 90 days; a loan granted for short-duration crops is treated as NPA if the instalment of principal or interest remains overdue for two crop seasons; while a loan granted for long-duration crops is seen as NPA if the instalment of principal or interest remains overdue for one crop season, according to RBI norms.

Kerala Bank Chief General Manager K C Sahadevan said its NPAs had been brought down to 12 per cent by the end of the last fiscal (March 2021-22). “There was a special recovery drive in the last three months. When we started the drive, the NPAs were 25 per cent. These could be brought down to 12 per cent, although our target was 10 per cent. By the end of next March, we want to bring NPAs further down to 7 per cent,” he said.

He also said that since Kerala Bank was formed in November 2019, no bad loan had been written off.