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Thursday, November 26, 2020

MSC Bank awaits NABARD’s nod for merger, non-agri lending

Vidyadhar Ananskar, chairman of the board of administrator of the MSC Bank, said the merger will help the bank to venture into non-agricultural retail lending.

Written by Parthasarathi Biswas | Pune | Updated: November 22, 2020 8:28:32 am
Maharashtra State Cooperative Bank, MSC Bank merger, NABARD, non-agri lending, Mumbai news, Maharashtra news, Indian express newsThe MSC Bank is the apex cooperative bank in the state and lends mostly to agricultural enterprises like sugar mills and agri processing units.

The Maharashtra State Cooperative (MSC) Bank is awaiting NABARD’s green signal for its proposed merger with the Rupee Cooperative Bank and the City Cooperative Bank. Vidyadhar Ananskar, chairman of the board of administrator of the MSC Bank, said the merger will help the bank to venture into non-agricultural retail lending.

The MSC Bank is the apex cooperative bank in the state and lends mostly to agricultural enterprises like sugar mills and agri processing units. Anaskar said the total exposure of the bank to the sector is Rs 22,000 crore, of which Rs 10,000 crore is earmarked for the sugar sector as pledge loan. Lending to the agricultural sector, Ananskar said, was of high risk given the intrinsic uncertainty associated with the sector.

Ananaskar said in order to minimise the risk, the MSC Bank has decided to enter into retail lending. The bank has expressed interest to merge the Rupee Cooperative Bank in Pune and the City Cooperative Bank in Mumbai. “We have got the in principle approval from the RBI but are now waiting for NABARD’s nod,” he said. These urban cooperative banks have been under RBI’s banking directives due to precarious financial status.

Anaskar said the bank would be using its own funds for retail lending and has sought to assure NABARD that the funds it receives for refinancing in the agri sector would not be utilised. “Our own fund is in the tune of Rs 4,500 crore and we hope to lend around 50 per cent of it for the retail sector,” he said.

For the 2020-21 sugarcane crushing season, Anaskar said they have earmarked Rs 10,000 crore as pledge loan lending. The bank deals with 40 sugar mills in the state. However, around 16 sugar mills might find it difficult to raise working capital from the bank given their negative Net Disposable Resources (NDR). NDR is the measure of resources available with units pledging that they can raise loans.

The issue of negative NDR had prevented 32 sugar mills in the state from getting pre-seasonal loans. It was only after the state government stepped in with bank guarantees that they were allowed to get loans. Anaskar said they would be seeking similar guarantee before providing pledge loan in the coming days. “We have to do it in accordance with the NABARD’s guideline,” he said.

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