Maha State Coop Bank turns black, proposes to achieve 12% CRAR by FY17

Bank will have to submit its audit report to state legislature after Feb 2013

Maharashtra State Cooperative Bank (MSCB), which is under administrators' rule since May 2011 after its board was dissolved by RBI for poor financial conditions, has turned black. From minus 1.50%, MSCB’s Capital to Risk (Weighted) Assets Ratio (CRAR) rose to 8.5% as on date and it is expected to increase to 12% in 2016-17. MSCB’s  gross NPA of Rs 2,584.87 crore have come down to Rs 2,179.69 crore as on march 2012 which would be further reduced to Rs 1,600 crore by March 2013. The Bank aims to bring down gross NPA below 5% by 2016-17.

MSCB, which has received banking license in April 2012, in its business plan also proposes to improve its bottom line. MSCB managing director Pramod Karnad told Business Standard “The Bank has wiped out its accumulated loss of Rs 76 crore and earned profit of Rs 18 crore on half yearly position. MSCB expects to reach the CRAR ratio at standard level of 9% by end of March 2013 and expects its net worth to raise at Rs 800 crore. In the current year, the Bank has already recovered Rs 300 crore by taking action against defaulters under SARFAESI Act by selling distressed units. The Bank proposes to recover further more Rs 200 crore under joint efforts in newly floated comprehensive settlement scheme and SARFAESI Act.”

Further, Karnad said the MSCB in its business plan proposes to stabilize its position moving towards professionalism and gaining more net spreads in the net interest margin. “MSCB will be positioned back to its glory to retain its ace position in the cooperative field,” he added.

State cooperation minister Harshvardhan Patil admitted that the Bank would have to become more professional in its functioning and it would have to strictly adhere to provisions of state cooperative laws after its amendment from February 15 next year.  He noted that MSCB would also have to step up its efforts to train its employees.

“MSCB and other federal organizations including Mahanand, Maharashtra State Cooperative Marketing Federation and Cotton Federation will have to submit their annual audit reports to the state legislature for its approval. Reinstatment of MSCB’s board of directors will be considered only after the government puts in place amended cooperative laws from February 15, 2013,” Patil said.  

MSCB’s board of directors with a majority members from the ruling Nationalist Congress Party received flak from the National Bank for Agriculture and Rural Development (Nabard)  in its March 2010 inspection report. Nabard ihad observed that the Bank did not ensure that stock pledged to it was held in lock and key. Besides, the Bank had diluted security norms. Without insisting for submission of unconditional government default guarantee for the working capital limits sanctioned to units having negative net worth, short margin in pledge accounts and accumulated losses, the bank had accepted joint and several liability bond of the directors of the sugar mills as substitute and allowed drawls. Further, the Bank had failed to ensure that the borrowing units maintained the stipulated cover for the borrowed funds, as a result, there were instances of many pledge accounts having short margin in pledge accounts.