71 Maharashtra Ucbs In Dire Straits

More than 10 per cent of urban co-operative banks (UCBs) in Maharashtra are in a severe financial crisis.

The office of the Commissioner of Co-operation & Registrar of Co-operative Societies and the Reserve Bank of India (RBI) have identified 71 out of 658 UCBs in the state as being in dire financial straits. Further, 27 of these 71 banks fall in the loss-making category.

The average erosion of net-owned funds of these banks has been pegged at 55 per cent. In Mumbai, 19 out of the 131 UCBs have been identified as sick. In Nashik, 11 out of 117; Pune 21 out of 235; Aurangabad 11 out of 105; and Nagpur 9 out of 70 UCBs were sick.

The RBI last week cancelled the licence of Mumbai-based Shree Labh Co-operative Bank, which was one of the 19 banks in the Mumbai region that have been identified as sick.

The latest aggregate data for the 71 banks shows the precarious state they are in. As on March-end 2001, out of their collective net owned funds of Rs 95.53 crore, the UCBs have suffered an erosion of Rs 42.20 crore. As against a collective deposit base of Rs 1,659.48 crore, the loans outstanding stood at Rs 1,677.51 crore. The average ratio of net non-performing assets to loans outstanding for the 71 banks was at 19.27 per cent as of March-end 2001.

The position of the 21 sick banks in the Pune region is the worst as the average erosion of net-owned funds has been pegged at 87.69 per cent. The sick banks in the region have collective loans outstanding position of Rs 952.57 crore as against a deposit base of Rs 565.01 crore.

The rehabilitation programme drawn for the banks includes setting targets for recoveries; enhancing share capital and deposits and bringing down the credit-deposit (CD) ratio to 60-65 per cent.

In the absence of any financial support from the central and state governments and the RBI disallowing the sick UCBs from declaring dividends, enhancing share capital has become a problem, sources pointed out.

"Shares of co-operative banks are attractive as they fetch 15- 20 per cent dividend. As against this, deposits with these bank earns a return of 10 to 12 per cent. But, with the RBI asking the sick UCBs to desist from declaring dividends, enhancing the share capital is proving to be a difficult task. The UCBs are further constrained in growing their share capital on fears of growing bad loans," said a senior co-operative banker.