‘TDS deductions on PACS’ cash withdrawals ignored’
By CL Jose
THIRUVANANTHAPURAM/October 17-2022: Even as some ‘observations’ made by the auditors have posed question marks on the Rs77.24 profit claimed to have earned by Kerala Bank for FY22, a large ‘fee and allowances’ under the bank’s expenditure during the year has raised a few eyebrows in the market.
While Kerala Bank has incurred Rs574.43 crore on salaries, allowances and provident fund of 5,366 permanent and understandably a few hundreds of temporary employees of the bank, ‘directors’ and local committee members’ fee and allowances’ have consumed an eye-popping Rs148.09 crore during 2021-22 (FY22).
Despite several attempts, businessbenchmark.news failed to obtain clarity on this particular expenditure. Moreover, a full financial report is not an easy stuff to access as the bank never uploads such details on its website.
It’s not clear whether this amount has been exclusively spent on fees and allowances to the Board of Directors comprising 20 members and the Board of Management made up of 12 members (5 members are common to both) during the financial year 2021-22.
This portal had earlier written, citing the comments made by the auditors, that they suspected substantial amount of bad loans have been concealed by ‘evergreening’ of loans, which in turn may have helped Kerala Bank show profit for 2021-22 (FY22) instead of a lower profir or perhaps even loss.
Why no TDS deductions?
The auditors have also made stark observations on the bank’s failure to make TDS deductions while explaining the “basis for its qualified opinion’ on the FY22 financials of Kerala Bank.
“On our verification, it is found that the bank has not deducted tax on cash withdrawals by cooperative societies in excess of Rs1crore/Rs20 lakh depending on the case,” auditors stated.
They added that considering the volume of such transactions, they are unable to quantify the amount of such cash withdrawals that may have taken place at the bank.
However, the bank has obtained an interim stay from High Court for deducting tax under Section 194 N.
Auditors have also highlighted the transactions with KSEB, where Kerala Bank has failed to comply with the provision of Section 194 Q by not deducting TDS on purchase of electricity from Kerala State Electricity Board Ltd (KSEBL).
The bank that nurses ambitious growth plans for the future already enjoys a discernibly top-heavy staff structure with one CEO, three chief general managers (CGMs), four general managers (GMs) and 8 regional general managers (RGMs).
Nonetheless, the current loan book of the bank is only Rs40,950.04 crore against a deposit base of Rs69,907.12 crore, leaving the bank at a far low credit-deposit ratio (CD ratio) of 58.58 per cent as of March end, 2022, compared with the other Kerala-based banks.
Lending still small
The former finance minister, Dr Thomas Isaac, who spearheaded the formation of Kerala Bank by amalgamating all the 14 district cooperative banks (Malappuram is yet to join), had been keen to nurture Kerala Bank into vital player in the state’s lending space.
But despite the passage of more than three years since its formation, Kerala Bank still leaves much to be desired on various fronts especially on lending.
The bank, where Kerala Government controls around 44 per cent shareholding, with the remaining held by primary agricultural cooperative societies (PACS) and other societies, still fails to have a proper website where financial details are displayed.
The bank seems to be constrained by a relatively low capital adequacy ratio (CAR) of just above 10 per cent, disallowing the bank to grow its loan book at a desired level and this may have pushed the bank into parking a big chunk if its funds in government securities.
Even the current CAR is mainained on the strength of Rs300 crore subordinate debt issued to Kerala Bank by PACS on the request of the latter.
Despite relentless efforts by the management, the bank is still saddled with huge bad loans, with gross NPA at Rs5,466.60 crore (13.35 per cent) and net NPA at Rs3,691.27 crore (9.01 per cent) as of March 31, 2022.
