[CO-OPERATIVE BANKS]

C O N T E N T S

EDITORIAL

Down but not out
The poor offtake of retail loans has pulled down credit growth

Red alert
After a sharp reduction in the last three years, NPAs are creeping back into banks’ balance sheets

A vote for the future
A distinguished Jury picks State Bank of India Chairman O P Bhatt as the Business Standard Banker of the year

Making the elephant dance
Interview with SBI Chairman O P Bhatt on his efforts at re-energising the bank

Round Table
Seven top bankers discuss “2009: Are banks in India ready for it?”

Dial ‘R’ for restraint
Cases of coercion and violence are forcing banks to soften their approach towards debt recovery

Database
All the data you wanted on banks

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Banking experts are of the opinion that the guidelines could be reviewed to allow small but strong UCBs with less than 10 branches or less than Rs 10 crore of net worth to open one branch every year.

However, caution seems to be the name of the game. While RBI has opened the window for applications from UCBs for new branches, it has also asked them to submit a viability plan for the new branches. Says Mukund Ghaisas, director, Maharashtra Urban Banks Federation, “At the eleventh hour, RBI has written to banks which have submitted a proposal to send profiles of new branches. RBI wants to know how the branch would be profitable and achieve targets outlined.”

STATE-WISE BREAK UP OF ACQUIRER BANKS
(as on May 21, 2007)
Act Under
Which
Registered
No. of
Acquirer
Banks
No. of
Proposals
Submitted
No. of
NOC
Issued
No. of
Proposals
Rejected
No. of
Proposals
Withdrawn
Proposals
Under
Processing
Multi-State 7 20 15 4 1 Nil
Maharashtra 11 18 8 6 Nil 4
Gujarat 8 11 9 1 1 Nil
Andhra Pradesh 3 3 2 1 Nil Nil
Karnataka 3 3 2 1 Nil Nil
Rajasthan 1 1 Nil 1 Nil Nil
Punjab 1 1 1 Nil Nil Nil
Uttarakhand 3 3 Nil Nil 1 2
Total 37 60 37 14 3 6

GROSS NON-PERFORMING ASSETS OF URBAN
CO-OPERATIVE BANKS
(Amount in Rs crore)

End -
March

No. of
Reporting
UCBs		 Gross NPAs
(Rs crore)		 Gross NPAs
as % of total
Advances		 Net NPAs
(Rs crore)		 Net NPAs
as % of total
Advances
2004 1,926 15,406 22.70 8242 2.10
2005 1,872 15,486 23.20 8257 12.30
2006 1,853 13,506 18.90 6335 8.80
2007P 1,813 13,363 17.00 6044 7.70
P: Provisional.

What seems to be making the apex bank happy is the fact that there is consolidation happening in the sector. It has approved 37 merger proposals out of 60 proposals received. As of now, 20 mergers have already taken place. Among the rest, 14 proposals have been rejected, six are under consideration and three have been withdrawn.

The main concerns, however, continue to be the ability of this sector to raise capital while still being able to maintain its co-operative nature. “In order to compete and not be blown away, we require some protection. Some of the co-operative systems internationally raise money on a collective basis. We can also tap the market through a consortium,” adds Krishna.

The RBI working group set up to examine the capital raising options for UCBs had also studied the federal co-operative bank structures in countries such as Netherlands, France and Finland. The group noted that bringing such a system in India would require an enabling legislative framework.

Recently, at a NAFCUB meeting in Delhi that was attended by Usha Thorat, deputy governor, RBI, a presentation was made by Rabobank, an apex body of 183 independent local Dutch co-operative banks. “RBI has said it is open to discussion. A separate committee needs to be formed to look into the structure of such apex institutions,” says Krishna. And, that is definitely a positive sign for the UCBs.•

Click here to download Co-Operative Banks Database

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Business Standard • December 2007