KYC details: NABARD sets December 31 deadline for DCCBs

The Reserve Bank of India (RBI) had said that DCCBs which fail to meet 7 per cent CAR could end up losing their banking licence.

Written by Partha Sarathi Biswas | Pune | Published: December 28, 2016 3:27 am
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The National Bank for Agriculture and Rural Development (NABARD) has given District Central Cooperative Banks (DCCBs) time till December 31 to submit details about the KYC norms of both individual account holders as well as primary cooperative agricultural societies (PACSs), which had deposited money with the banks between November 10 and 14. While this is the first step towards 100 per cent KYC verification of the accounts, lack of a proper timeframe about completion of the process may result in the DCCBs failing to meet the Capital Adequacy Ratio (CAR) norms of 7 per cent by March 2017.

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The Reserve Bank of India (RBI) had said that DCCBs which fail to meet 7 per cent CAR could end up losing their banking licence.  The 31 DCCBs in Maharashtra have seen deposits of about Rs 4,700 crore between November 10 and 14 in old currency notes. The DCCBs were restrained by the RBI from depositing or exchanging old currency notes after November 14, a move the cooperative banks challenged in the Supreme Court.

Earlier this month, the Supreme Court stayed the RBI’s restriction, but attached certain riders with its order. The apex court asked NABARD to carry out 100 per cent verification of KYC norms of both customers and PACS before the money is remitted by other banks. Recently, NABARD had written to the DCCBs, asking them to submit KYC details about the depositors and PACS by December 31. It is expected that NABARD will take up 100 per cent verification of the norms after that.

However, RBI directives — on the operational guidelines of how exactly NABARD, the supervisory body of DCCBs, would go about this — is still to be issued. Officials of the cooperative department said 100 per cent verification of KYC norms will take time. The 31 DCCBs in Maharashtra have deposits worth Rs 60,000 crore and as many as 21,000 PACSs are operational in the state.

Officers from the department of cooperation said delay in remittance of old notes will affect the income of DCCBs as well as their financial health.

“Delay in the re-verification process would mean compounding losses for the DCCBs. Some of these banks may fail to meet the 7 per cent CAR norm and could end up losing their license,” said a senior officer from the cooperation department. The DCCBs of Wardha and Buldhana are also facing problems with the recovery of their loans, which might impact their financial health further. The DCCBs in Pune, Satara and Thane have seen substantial deposits and the delay in remittance has hit them hard.

Ramesh Thorat, president of Pune DCCB, said his bank is facing losses as high as Rs 10 lakh per day due to the non-remittance of old currency notes. The Satara DCCB has seen deposits worth Rs 300 crore, of which Rs 106 crore are yet to be remitted. Dr Rajendra Sarkale, chief executive officer of Satara DCCB, said the bank is facing a loss of Rs 1 lakh per day. “We did receive the instructions from NABARD and we will be sending all the details in the next few days,” he said.

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