Restrictions on loans, deposits and other payments for 6 months
By CL Jose
MUMBAI/August 24-2022: The Reserve Bank of India (RBI) has put on hold all loans, accepting deposits and disbursing any payments by the Thodupuzha Urban Co-operative Bank Ltd (TUCBL) for a period of six months from August 23.
The bank has been facing problems on the front of growing non-performing loans (NPLs) for the past two years and the RBI had previously too issued certain Directions in this regard.
The RBI Directions have been issued under Section 35 A read with section 56 of the Banking Regulation Act, 1949 (As Applicable to Co-operative Societies).
A statement from RBI said, “It has issued certain Directions to Thodupuzha Urban Co-operative Bank, whereby, as from the close of business on August 23, 2022, the bank shall not, without prior approval of RBI in writing grant or renew any loans and advances, make any investment, incur any liability including borrowal of funds and acceptance of fresh deposits, disburse or agree to disburse any payment whether in discharge of its liabilities and obligations or otherwise, enter into any compromise or arrangement and sell, transfer or otherwise dispose of any of its properties or assets except as notified in the RBI Direction dated August 23, 2022.”
Considering the bank’s present liquidity position, RBI said, no amount from the total balance across all savings bank or current accounts or any other account of a depositor, may be allowed to be withdrawn, but are allowed to set off loans against deposits subject to the conditions stated in the said RBI Directions.
Growing NPA
The decades-old Thodupuzha Urban Cooperating Bank has been grappling with the growing NPA menace even as about 47 per cent of its loans have turned bad as per the latest estimates, further increasing from about 27 per as of March 31, 2022.
Talking to businessbenchmark.news, sources close to the cooperative bank, said the bank is sound as far as its financials are concerned with adequate capital and sufficient securities to cover all its bad loans.
The real issue faced by TUCBL is that on the one hand, the bank is not able to find buyers for the collateral securities (mainly landed) offered on auctions, and more seriously, many large borrowers with political and financial clout manage to obtain stay against the sale of securities leaving the bank high and dry.
TUCBL with a deposit base of about Rs250 crore has a loan book of about Rs150 crore. According to an official of the bank, there has been a growing loan concentration in its book, with four or five borrowers accounting for about 30 per cent of its loans.
