Is Kerala Bank profit real? One-time-settlement (OTS) beneficiaries get repeat loans
By CL Jose
THIRUVANANTHAPURAM/October 04-2022: Is the Kerala Bank’s claim of Rs77.24 crore profit for the just-concluded financial year 2021-22 (FY22) real?
The auditors of Kerala Bank have cast aspersions on the bank’s claim about FY22 profit, as has it raised doubts about the previous year’s profitability too.
The observations made by the auditors on the FY22 financials, explaining the ‘Basis for Qualified Opinion’, could be inferred as a possibility of the bank having resorted to a cover-up of its bad loans in order to feign profit or inflate profit for FY22.
From what the auditors of the bank explained as the ‘basis for its qualified opinion’ it’s amply evident that the bank has made efforts to cover up some of its bad loans so as to show profit in its books.
Talking to businessbenchmark.news, secretary of a primary agricultural coop society (PACS), said if Kerala Bank prudently recognised and provided for the bad loans as mandated by the Reserve Bank of India (RBI), Kerala Bank’s loss would be phenomenal.
Kerala Bank’s officials were not available on phone for clarifications or comments as usual, and hence the story is produced as a narrative without their comments.
“I don’t know how long the bank can go ahead with this cover-up game,” the PACS secretary said. The modus operandi followed by the bank was to close non-performing loans (NPLs) by sanctioning fresh loans and thus show such loans as performing loans, which is called ‘evergreening of loans’ in banking parlance.
Worse, there are even cases of new loans being sanctioned for borrowers whose former loans were closed or interest waived through one-time settlement (OTS) scheme.
“We have observed on multiple occasions, loans which were non-performing in nature were closed by sanctioning fresh loans. Further we have also observed in some cases, advances (loans) which were otherwise non-performing in nature were regularised by crediting the account with the proceeds from the newly sanctioned loans,” the auditors commented.
These clearly indicate that NPAs or bad loans were regularised through book adjustments. “It’s practically not possible to verify each and every new loan sanctioned during the period and hence the auditors are unable to quantify the impact of the same on the profit & loss account (P&L),” they noted further.
Like most government-owned companies, statistics are hard to be found on Kerala Bank too. Quite ironically, Kerala Bank claims to run a very dynamic website, but to anyone’s surprise, the only relevant content the website of the bank that has completed three years of its existence, is the ‘interest rates’ offered by the bank, as well as the background & structure of the bank.
In the website, under ‘Circulars’ head it says, “contents to be updated soon”. Forget about the financial details or annual reports of the bank, no one could access any numbers related to the bank other than the ones handed out through the press releases once in a while.
Poor lenders
Kerala Bank was launched some time in 2019 with much fanfare as the ideal ‘pro-people’ bank. The bank that was launched three years ago evoking much euphoria, especially among the loan aspirants from the marginalised class, has now been reduced to the ‘poorest performer’ in the state in terms of loans disbursal (CD ratio) in relation to the deposits raised.
While the banks in Kerala enjoy a CD ratio in the range of 70 per cent to 80 per cent, Kerala Bank’s CD ratio is just 58.58 per cent.
The Central and State governments are the largest beneficiaries of Kerala Bank as an aggregate amount of Rs30,530 crore has been lent to them (as of March 31, 2022) through purchase of their debt securities.
