The last couple of years have been fairly dismal for many local banks and the story has been no different for Maharashtra’s District Central Co-operative Banks or DCCBs. Like their bigger peers, the district co-operative banks have reported a decline in profits but showed a rise in non-performing assets (NPAs) during the fiscal that ended in March 2016.
Consider this: Figures released by the Reserve Bank of India (RBI) in the last week of December 2017 show that 31 DCCBs posted a lower profit Rs 328.2 crore in the 2016 fiscal against Rs 559 crore in the same period last year. Just like the bigger lenders, gross NPAs, or bad loans, of these co-operative banks to advances ratio rose from 14 per cent to 15 per cent during the year.
The RBI is yet to release the figures for March 2017 but bankers reckon that the financial ratios may have worsened further as demonetisation hit the DCCBs with the RBI clamping on their operations. Many DCCBs were saddled with demonetised notes of Rs 500 and Rs 1,000 that the RBI refused to accept initially, suspecting money laundering, but later, agreed to accept.
In terms of bad loans, Maharashtra ranks fourth behind Jharkhand that reported NPAs of 47.6 per cent, Bihar, 24.5 per cent and Jammu & Kashmir at 15.1 per cent. DCCBs in Rajasthan reported the lowest NPA to advances ratio of 3.8 per cent among states. Punjab DCCBs, too, showed a lower NPA ratio of 4.8 per cent.
In the case of state co-operative banks (SCBs), Maharashtra reported a decline in profit, from Rs 410 crore to Rs 242 crore, during 2016 fiscal. However, it managed to bring down NPAs from 11.7 per cent to 9.3 per cent.
Maharashtra also reported a spate of mergers among urban co-operative banks (UCBs). The mergers/ amalgamations/exit plan of the RBI led to a reduction in the number of UCBs. Beginning with 2004-05, the UCB sector has undergone 128 mergers till March 2017 with Maharashtra accounting for the maximum number, followed by Gujarat and Andhra Pradesh. Clearly, the state DCCB’s have a challenging year ahead.