The financial health of as many as 31 District Central Cooperative Banks (DCCBs) in Pune is yet to recover from the effects of demonetisation, over a year after it was introduced by the Centre. An RTI query filed by The Indian Express with NABARD shows that almost all the banks have reported a significant increase in bad debts, raising serious questions about their future.
Immediately after the withdrawal of Rs 500 and Rs 1,000 notes on November 8 last year, the Reserve Bank of India (RBI) had faced allegations of unfavourable treatment to these predominantly rural banks. Not only were these banks banned from exchanging the withdrawn notes, the RBI even refused to exchange the Rs 2,000 crore they had in old currency notes. After the matter reached the Supreme Court, the apex bank relented and allowed the money to be exchanged in June, but set a deadline for doing so.
Today, months after the deadline, these DCCBs are still saddled with over Rs 150 crore, which form part of the 1 per cent of old currency notes that have not returned to the coffers of the RBI.
The banks suffered further as the recovery of loans were hit severely by demonetisation, and the banks had to pay about Rs 4,000 crore in interest to their depositors as the RBI had refused to allow them to exchange old notes.
Responses to the RTI query reveal that of the 31 banks, 18 DCCBs have reported a considerable increase in their Non-Performing Assets (NPAs). By the end of financial year 2016, the net NPA of the 31 banks stood at 7.6 per cent to the net advances, while at the end of March 2017, it stood at 8.6 per cent.
The net NPA of these banks, at the end of March 2017, was Rs 3,784.76 crore, higher than the net NPA at the end of March 2016 — Rs 3,284.39 crore.
The banks located in Amravati, Aurangabad, Beed, Bhandara, Chandrapur, Latur, Osmanabad, Pune, Sangli, Gondia, Jalgaon, Thane, Wardha and Yavatmal have reported an increase in their bad debt amounts. Many of these banks, in fact, have reported doubling of their bad debts over the last year.
Maharashtra’s DCCBs account for almost 40 per cent of crop loan disbursals, but most of their borrowers are small land holders who may find it difficult to access other forms of institutional credit. The disruptions in the cooperative credit structure is evident from the crop loan disbursal figures of this year, which reveal that all these banks have failed to meet their targets.
For the 2016 kharif season, these banks had managed to disburse Rs 12,769.78 crore, or 97 per cent, of their target of Rs 13,113.57 crore.
In this year’s kharif season, the DCCBs have distributed only Rs 8,232.93 crore, approximately 63 per cent, against their target of Rs 18,205.34 crore.
In Maharashtra, the overall kharif crop loan disbursal met only 44 per cent of the target, down from 88 per cent last year.
As the DCCBs, a vital part of the state’s rural economy, have struggled to stay afloat, the state government has announced the formation of a committee to improve their condition. The committee has been given six months to submit its report, but sources in the cooperative department have talked of a possible merger of weak banks with the Maharashtra State Cooperative Bank.
Vishwas Utagi, vice-president of All India Bank Employees Association, claimed there was a “systematic effort to weaken these banks and dismantle the whole cooperative credit structure”.
“The Maharashtra State Cooperative Bank has become a profit-making venture, yet the board of administrators is not being phased out. The state government has been trying to wrestle the control of these banks from the opposition, but has failed to do so in the last three years. Now, along with the regulator NBARD, the state government is trying to weaken the structures of these banks,” he said.