Kerala Bank profit skyrockets over 556% to Rs210cr for FY24

Malappuram District Co-operative Bank reports loss of Rs38cr

KOCHI: Kerala State Co-operative Bank or Kerala Bank is said to have earned a record net profit of Rs210 crore for the financial year2023-24 (FY24) compared with Rs32 crore reported for the previous year, registering a whooping growth of more than 556 per cent.

A big chunk of this profit has likely been contributed by recovery of large bad loans like that of Kerala Transport Development Finance Corporation Limited (KTDFC).

In fact, Kerala Bank has made a profit of Rs248 crore for FY24. However,  since Malappuram District Co-operative Bank, which is yet to be fully amalgamated with Kerala Bank, has reportedly posted a loss of Rs38 crore, which ultimately reduced Kerala Bank’s net profit to Rs210 crore.

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It may be recalled that Kerala Bank’s FY23 profit had to be reversed to a loss after NABARD intervened in the bank’s profit and loss account.

Bad loans challenge

Kerala Bank was formed in 2019 after amalgamating 13 district co-operative banks (DCB) with KSCB. Malappuram District Co-operative Bank opted out from the amalgamation, maybe for `political reasons.’

Despite the attractive profit, Kerala Bank currently faces two challenges, namely large bad loan pool of above 11 per cent and low capital adequacy ratio (CAR) that could impede growth of loans in the future.

Kerala Bank has sought the approval from Reserve Bank of India (RBI) to raise Rs500 crore as long-term loans or subordinate debt (sub-debt) from the primary agricultural cooperative societies (PACS) to shore up the capital.

Kerala Bank’s capital adequacy ratio (CAR) has been hovering around 9.7 per cent, just 70 basis points above 9 per cent, the minimum required by the bank. 

Disbursal of further loans could see the CAR of Kerala Bank fall below 9 per cent, which is not permissible under the capital norms prescribed by the regulators. 

Since PACS is the second largest shareholder of Kerala Bank after the Government of Kerala that owns close to 50 per cent of the bank, the management of the bank has approached PACS to chip in additional capital in the form of subordinate debt, which qualifies for Tier 2 capital.

Earlier too, Kerala Bank had raised long-term loans from PACS to strengthen its capital base.

In an official release signed by Gopi Kottamurickal, the president of the bank and Jorty M Chacko, the chief executive of the bank (CEO), the bank revealed that it has disbursed loans valued at Rs19,601 crore during 2023-24 (FY24).

While 99,200 loans were issued in the agricultural sector, 85,000 loans were disbursed for the benefit of small businesses.

With the handsome profit earned by the bank for the financial year 2023-24 (FY24), it could strengthen the capital adequacy ratio (CAR) to a comfortable 10.32 per cent as of March 31, 2024.

While the NPAs stayed at 11.45 per cent as of March 31, 2024, the accumulated losses have come down to Rs477 crore compared with Rs1151 crore the bank used to have at the time of the formation of the bank, on November 29, 2019.

Focus on agri loans

Gopi Kottamurickal and the bank’s CEO Jorty Chacko have stated that the bank will lay special focus on agricultural loans during the current financial year, FY25. As per the plans chalked out for this sector, the bank will increase the loans to agricultural sector from the current 24.65 per cent of the total loans to 30 per cent by the end of the current financial year and thereafter to 33 per cent by the close of the financial year 2025-26 (FY26).

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