Contribution to the loan market is just 11 pc
By CL Jose
THIRUVANANTHAPURAM/November 15-2022: The contribution of the famed cooperative banking system in Kerala to the gross non-performing assets (NPAs) or bad loans of the state’s banking system stood at 43.25 per cent as on June 30, 2022.
Mind you, the state’s banking industry at large has only 5.7 per cent NPAs as of June 30.
More seriously, the cooperative banking industry’s presence in the state’s loan market is to the extent of just 11.10 per cent.
Kerala has scores of banks including 12 public sector and 20 private sector banks present through their branch network, apart from the branches of the cooperative banks.
Together these banks manage an aggregate loan book of Rs4,89,843.91 crore, where Rs27,932.38 crore worth advances have turned bad as of June 30.
Having said that, the cooperative banking system mentioned here doesn’t include the thousands of cooperative credit societies, which themselves call and brazenly flaunt boards that read ‘banks’ against repeated RBI diktats.
Kerala Bank
The Lion’s share of the bad loans in the cooperative banking sector has stemmed from the Kerala State Cooperative Agricultural and Rural Development Bank (KSCARDB) including primary Cooperative Agricultural and Rural Development Banks (PCARDB).
However, Kerala State Cooperative Bank (KSCB), which has been branded as ‘Kerala Bank’ following the grant merger of 13 district cooperative banks three years ago, is not without its due share to the bad loan baggage of the cooperative banking system.
Though Kerala Bank’s bad loans are officially estimated at Rs5,666.49 crore, accounting for 13.26 per cent of its Rs42,732 crore-large loan book (as of June end), auditors of the bank have repeatedly flagged the possibility of much larger volume of hidden bad loans, thanks to the reported ‘evergreening’ of loans practised by the bank year after year.
Bad loans higher in Kerala!
It may sound a bit inexplicable that most Kerala-based private sector banks have developed bad loans disproportionally larger than their loan share in Kerala.
For example, Federal Bank, the largest bank from the state, though enjoys a credit-deposit ratio (CD ratio) as low as 41.43 per cent, the share of bad loans from the state is much higher, at 52.45 per cent.
In the case of CSB Bank, while the CD ratio is 39.36 per cent, the contribution of bad loans from the state is 46.09 per cent. For Dhanlaxmi Bank, it is 49.74 per cent versus 61.16 per cent.
But interestingly, in the case of the Thrissur-based South Indian Bank (SIB), the loans and bad loans have evened out to enjoy almost the same ratio.
The picture is totally different for the public sector banks, which carry an aggregate bad loan book of Rs8,359.29 crore. With the total loans to the tune of Rs2,42,474 crore, PSU banks’ bad loan ratio was at 3.44 per cent as of June end, 2022.
(credit to malayalam version appeared on myfinpoint.com)
