IRINJALAKUDA: Irinjalakuda Town Co-operative Bank's (ITU Bank) financial position has deteriorated sharply in just one year, leaving shareholders to ask a more fundamental question: can their bank ever return to normal banking?
The deterioration is evident in almost every key financial indicator. Gross NPAs have jumped from Rs196 crore in FY25 to Rs267.74 crore in FY26, taking the NPA ratio from 38.93 per cent of advances to 73.02 per cent. Net NPA ratio has almost doubled from 33.51 per cent to 64.52 per cent.
The capital position, already precarious in FY25, has deteriorated much further. Capital to risk-weighted assets ratio (CRAR) has fallen from minus 0.19 per cent (-0.19%) to minus 6.77 per cent (-6.77%), against the 11 per cent regulatory level the bank was required to achieve by March 31, 2026.
The loss has also increased, from Rs45.22 crore in FY25 to Rs49.11 crore in FY26. More significantly, accumulated losses have risen from Rs74.33 crore to Rs123.44 crore, resulting in complete erosion of net worth.
There has been an equally sharp fall on the deposit side. Deposits have plunged from Rs1,032.36 crore to Rs477.15 crore in a year — a drop of more than 53 per cent during the said period. Advances, too, have declined from Rs503.51 crore to Rs366.66 crore.
And then there is the DICGC intervention.
Rs462.07cr deposit claims settled
The bank received Rs462.07 crore from DICGC during FY26 towards settlement of insured deposit claims and disbursed the amount to eligible depositors. But the entire amount is now shown as payable to DICGC — Rs369.66 crore as long-term liability and Rs92.41 crore as short-term liability.
The scale of the intervention becomes striking when compared with the bank's remaining deposit base. The Rs462.07 crore DICGC payout was equivalent to nearly 97 per cent of the bank's Rs477.15-crore deposits at the end of FY26.
For the bank, therefore, the challenge is no longer simply to return to profitability. It has to recover a severely stressed loan book, rebuild its capital, restore its net worth and deal with the liability to DICGC — while continuing to operate under RBI restrictions.
The auditors have also raised concerns that go beyond the headline financial numbers. The bank's core banking system was still not fully aligned with RBI requirements for automated asset classification, despite a June 2025 deadline for rectification.
Some properties acquired by the bank in recovery of dues continue to have title deeds in the borrowers' names. The auditors said the absence of legal title may affect the bank's enforceable ownership rights over these assets. The bank had Rs362.68 crore of non-banking assets acquired in satisfaction of claims at the end of FY26.
Red flags from auditors
The auditors have also flagged instances of withdrawals above the Rs10,000 limit prescribed under the RBI's All-Inclusive Directions and payments to some depositors above the Rs5-lakh DICGC insurance limit. In both cases, the auditors said they could not determine the aggregate amount because of inadequate records and reconciliations.
The auditor's report has gone as far as flagging a material uncertainty about the bank's ability to continue as a going concern, citing its losses, eroded net worth, rising NPAs and weakened capital and liquidity position.
The management has proposed a revival plan involving monetisation of non-core assets, stronger NPA recovery, one-time settlement schemes, branch consolidation and staff optimisation.
But the distance the bank has to travel has become much greater in just one year - during FY26.
The question for Irinjalakuda Town Co-operative Bank is therefore no longer simply how it can contain its losses. It is whether it can rebuild a bank whose financial position has deteriorated so sharply in the space of a year.
