State to crack the whip on DCC banks as NPA on the rise

With 20 of the 31 DCC banks reporting non-performing assets (NPA)s more than 10 per cent, questions are now being raised on whether these bank faced action by the Reserve Bank of India.

Written by Partha Sarathi Biswas | Pune | Published: September 18, 2015 4:57:15 am

In a move which can further increase the troubles for the NCP and Congress, the state government has decided to institute an inquiry into the functioning of the district central cooperative (DCC) banks. State Revenue Minister Eknath Khadse told The Indian Express that the state government would order attachment of properties of people found guilty in the process.

With 20 of the 31 DCC banks reporting non-performing assets (NPA)s more than 10 per cent, questions are now being raised on whether these bank faced action by the Reserve Bank of India.

A majority of the DCC banks in the state are still controlled by NCP or Congress leaders. Former deputy chief minister Ajit Pawar has been indicted in the multi-crore scam, which had rocked the Maharashtra State Cooperative Bank, the apex DCC bank of the state, last year.

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Khadse pointed out how the financial health of the DCC banks had taken a turn for the worse over the past few years. “Financial mismanagement has led to an increase in bad debts which has threatened the very existence of the banks now,” said Khadse. As many as 31 DCC banks functional in the state banks of Thane, Raigad, Ratnagiri, Sindhudurg, Jalgaon, Ahmednagar, Akola and Gadchiroli have their NPA per cents below the mandated 5 per cent mark.

Pune and Sangli DCCs have reported NPAs of 7 and 8 per cent, respectively, while the other DCCs have NPA levels at more than 10 per cent. Of the remaining DCC banks, five have reported NPA between 10-20 per cent, five have NPA levels between 20-30 per cent, while six have their NPA levels between 30-40 per cent.

At present, Osmanabad DCC has the highest NPA of 41 per cent in the state. Satara DCC by far has the best financial health with its NPA level at 0.29 per cent. Auditing of DCC Bhandara is yet to be completed, while the three DCCs of Nagpur, Buldhana and Wardha have lost their licences due to precarious financial conditions. This year, the DCCs of Dhule-Nandurbar, Kolhapur, Nagpur and Wardha have reported operating losses.

In 2013, the RBI had taken the step of de-licencing the DCCs of Nagpur Buldhana and Wardha due to their financial situation. This decision of the RBI had put the farmers in the district in a fix as more than half of the crop loans were distributed through the DCC banks. Although the commercial and rural banks were asked to take up the extra burden in distributing crop loans, data showed that this year they could reach only 70 per cent of the target.

With another year of drought and agrarian crisis looming large over the state, mounting NPAs have become a cause of major concern. Like a majority of cooperative institutions of the state, most of the DCC banks are still under the control of the NCP and Congress. Khadse said the government had already spent “thousands of crores” in
order to help the banks stand on their feet. “We will draw up a long-term plan in consultation with NABARD and RBI to ensure the banks are financially viable,” said Khadse.

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