NPAs of Urban Coop Banks more than double in Gujarat

GUCBF joins hands with NPAsource.com for resolution and management of NPAs

As a major challenge for the urban cooperative banks (UCBs) in Gujarat, the gross non-performing assets (NPAs) of these banks have more than doubled since 2009-10. According to industry estimate, the gross NPAs of UCBs in Gujarat has increased from Rs 438 crore in 2009-10 to about Rs 900 crore in 2010-11.

According to data provided by the Gujarat Urban Cooperative Banks' Federation (GUCBF), the gross NPA for 2009-10 was 4.03 per cent to the gross advances of over Rs 11,600 crore during the year. In 2010-11, the gross advances stood at Rs 12,056 crore, of which about Rs 900 crore or 7.46 per cent was considered as NPA. "The NPAs have risen due to various reasons including failure to recover debt, in some instances the cases registered with the debt recovery tribunals got delayed and sometimes the management failed to take timely action against bad loans," said an official at GUCBF.

However, the increasing number of NPAs has attracted private player like Atishya Group, to facilitate UCBs for recovery of their money from sale of such NPAs to investors based across India.

Atishya Group operates a portal, NPAsource.com, which is a platform to facilitate banks to resolve their NPAs and potential and genuine investors to invest in companies. "A system that identifies bad account in advance and curtails deterioration in asset quality would be of vital importance to the banking industry. We aim to target 100 per cent of the NPAs that UCBs in Gujarat have and put them on our portal for display to domestic and international investors," said Devendra Jain, CMD, Atishya Group.

Gujarat, currently has 244 UCBs with 862 branches spread across the state. The total deposits with the UCBs in Gujarat is Rs 21, 668 crore, while advances stood at Rs 12,056 crore as on March 31, 2011. The UCBs have more than 2.8 million members and over 8.9 million depositors.

GUCBF has sent a recommendation letter to all its member banks asking them to utilise the facilities provided by NPAsource.com so as to resolve their NPA related issues.

"We expect this to be a step in right direction for the UCBs in Gujarat. Management of NPAs is a major concern for banks and such facility would provide ample room to select investor, thereby yielding better value for the asset. This is a new concept and banks should adopt it," said Jyotindra Mehta, chairman, GUCBF.

According to RBI guidelines, a credit account will be classified as NPA if it is out of order for more than 90 days. After the introduction of grading methodology, UCBs have been asked to keep their net NPAs below 10 per cent.

Nationally, the gross NPAs of UCBs stood at 10.1 per cent in 2009-10, while it fell in 2010-11 to 8.5 per cent. The loan amounts have increased over the years and the profitability of UCBs too have improved. This resulted in increased provisioning for bad loans over the years.