Kerala Bank has sought the permission of the Reserve Bank of India to collect deposits from NRI’s, eyeing the ₹1,50,000,000 crore NRI deposits credited to various commercial and PSU and private sector banks in the State.
V N Vasavan, the State Cooperation Minister, pointed out that a major share of this NRI deposit amount is being utilised for disbursing loans to big corporates outside the State and in speculative businesses in stock markets. Kerala Bank is aiming to utilise these NRI deposits for developing the basic infrastructure of the State.
The bank will provide an opportunity for non-resident Keralites to be part of the development of the State and to intervene in its economy, he added.
IT integration programme
The Minister was speaking to reporters after launching the IT integration programme, thereby transforming the bank into a modern bank providing all digital banking services.
Finacle software from Infosys will be used for core banking initiatives. With this, Kerala Bank will become the first cooperative bank in the country to use the most modern version of Finacle. Wipro has taken charge of the software unification and IT integration is expected to be completed by April 1, 2022.
Model cooperative bank
Kerala Bank, which is formed as a model to the entire country in the cooperative banking sector through the merger of 13 DCB’s, has grown to the position of the second largest bank in the State with total business of ₹1,06,396 crore and 769 branches. The bank has been able to disburse ₹842.54 crore so far for employment schemes, as part of the 100 days action programme of the State Government, said P S Rajan, the CEO of the bank.
The bank has been able to post a growth of 9.27 per cent in deposits for the first full financial year (2020–21) after its formation. The deposits rose from ₹61,071 crore to ₹66,731 crore. The net profit for the year 2020–21 was ₹61.99 crore.
The bank has been able to bring down its NPA from above 25 per cent at the time of the merger to 14.40 per cent. As of last fiscal, NPA stood at ₹5,738 crore. The accumulated loss during the merger was ₹1,151 crore and the bank could bring it down to ₹714 crore.
It has also made significant progress in providing a refinance scheme through NABARD. The refinance facility, which was ₹4,315 crore in 2019–20 shot up to ₹6,058 crore in 2020–21. The increase was 40.39 per cent.
Capital to risk (weighted) assets ratio (CRAR), which was the major indicator of financial stability, was 6.26 per cent at the time of merger. This has increased to 10.18 per cent now. The RBI insists only on a CRAR of 9 per cent. The bank was able to scale up CRAR riding on the ₹400 crore share investments by Kerala Government.
MADURAI: Special teams constituted to scrutinize gold loans provided by cooperative societies across the state have to complete 100% scrutiny of all loans and submit their reports to the concerned regional registrar of cooperative societies by November 15.
The regional joint registrars would submit their compiled reports on the status of the loans in their regions to Registrar of Cooperative Societies, Chennai by November 20.
This was stated in a communication dated September 24 from the registrar to the managing director, Central Cooperative Bank, Chennai, regional registrars and other officials. It said the chief minister had announced under Rule 110 of the Assembly that all eligible gold loans up to five sovereigns obtained through cooperative societies would be waived. But it has been detected that misappropriations have taken place in providing these gold loans and hence it has been decided to scrutinize the loans provided through the societies.
According to the chief minister’s announcement in the Assembly, the state would incur an expenditure of Rs 6,000 crore due to the waiver. The registrar has said that all gold loans that had been obtained till March 31, 2021 and from April 1, 2021 to the date of scrutiny should be reviewed 100%.
Committees comprising joint registrars of the societies should decide on the number of gold appraisers needed for the scrutiny and form committees.
Cooperative societies in each region would be scrutinized by teams from the neighbouring region. For example, Trichy region would be reviewed by officials from Ariyalur, Karur by Dindigul, Theni region by officials from Madurai etc..
Jabalpur, Sep 6 (PTI) The Madhya Pradesh High Court has stayed an RBI notification related to appointment and removal of managing directors and whole-time directors in Urban Cooperative Banks (UCBs) operating in states.
A division bench comprising Chief Justice Mohammad Rafiq and Justice VK Shukla, while hearing a petition, on Friday (September 3) stayed the Reserve Bank of India (RBI) circular issued on June 25.
The HC has also issued notices to the RBI, the Centre and state governments on the petition filed by Bhopal-based Mahanagar Nagrik Sahkari Bank Maryadit, the petitioner bank’s counsel, Ajay Gupta, said. The court order said, “Issue notice to the respondents on payment of PF (processing fee) within seven days returnable within eight weeks.” “In the meanwhile, operation and effect of the impugned order dated 25.06.2021 qua ((with regard to) the petitioner shall remain stayed”, the HC said.
The Bhopal-based urban cooperative bank has challenged the constitutional validity of the RBI notification. Gupta said the RBI’s order has regulated appointment, re-appointment and removal of managing directors (MDs) and whole-time directors (WTD) of UCBs. Service conditions of MDs and/or Chief Executive Officers of UCBs is governed under the bye-laws of the MP State Cooperative Societies Act, the petitioner’s counsel said.
The cooperative as a subject falls under Entry 32 in List-II – State list – in the Seventh Schedule of the Constitution, whereas the banking falls under Entry 45 in List-I – Union list – of the Seventh Schedule, he said.
Therefore, the power to legislate and regulate UCBs falls exclusively with the state domain and does not lie in the purview of the Union, much less the RBI, Gupta said. “Thus, the RBI order is absolutely incompetent and lacks in authority,” he claimed. The court has granted eight weeks to the respondents to file their replies to the notices issued to them, Gupta added. PTI COR ADU RSY RSY
Depositors of stressed banks like Punjab & Maharashtra Cooperative (PMC) Bank are now set to get up to Rs 5 lakh back from November 30 as the government has notified the amendment to the DICGC Act.
Parliament earlier this month passed the Deposit Insurance and Credit Guarantee Corporation (Amendment) Bill, 2021 ensuring that account holders get up to Rs 5 lakh within 90 days of the RBI imposing moratorium on the banks. The amount of Rs 5 lakh would be provided by the Deposit Insurance and Credit Guarantee Corporation (DICGC). The government has notified September 1, 2021 as the date on which the provisions of the Act shall come into force, according to a gazette notification dated August 27, 2021.
“In exercise of the powers conferred by sub-section (2) of section 1 of the Deposit Insurance and Credit Guarantee Corporation (Amendment) Act, 2021 (30 of 2021), the Central Government hereby appoints the 1st day of September, 2021, as the date on which the provisions of the said Act shall come into force,” it said.
Effective date
Consequently, 90 days from the effective date is November 30, 2021 for depositors to get their funds back.
The first 45 days are meant for the bank, which has come under stress, to collect all the details of the accounts where the claims will have to be made. This will then be forwarded to the insurance company, which in real-time will check it all up, and nearer the 90th day, depositors will get the money, Finance Minister Nirmala Sitharaman had said. The benefit will also accrue to the depositors of 23 cooperative banks which are in financial stress and on which the Reserve Bank of India (RBI) has imposed certain restrictions.
DICGC, a wholly-owned subsidiary of the RBI, provides insurance cover on bank deposits. At present, it takes 8-10 years for the depositors of a stressed bank to get their insured money and other claims.
Cooperative bank failures
Though the RBI and the Centre keep monitoring the health of all banks, there have been numerous recent cases of lenders, especially cooperative banks, being unable to fulfil their obligations towards the depositors due to the imposition of a moratorium by the RBI.
Last year, the government increased the insurance cover on deposits by five times to Rs 5 lakh. The enhanced deposit insurance cover of Rs 5 lakh came into effect from February 4, 2020. Every bank used to pay 10 paise as an insurance premium per Rs 100 of deposit.
KOLKATA: The Bengal government aims to conduct audits in all the cooperative banks in the state, including 17 central cooperative banks. The purpose is to identify benami accounts and confiscate money stashed in such accounts.
Announcing the decision on Wednesday, chief minister Mamata Banerjee said: “The government can conduct audits in cooperative banks. We will do that to identify benami accounts. Some people have accounts in these banks in multiple names and have been enjoying the fruits for long. The government will identify these benami accounts and forfeit money stashed in these accounts.”
The CM also sent out a stern warning against illegal sand and coal mining, and extorting money from goods carriers. “I have asked police to take strong action, no matter who is involved. No one will be spared. I have information that some BJP men are extorting money from trucks in Haldia. What is going on in Haldia Port?” she said.
There are about 8.5 lakh co-operatives in the country with roughly 38 crore members. Of these, 1,539 are urban cooperative banks (UCBs) and 97,006 rural ones with a combined asset size of as much as Rs 17-18 lakh crore, an official source told FE.
From a tiny wing of the agriculture ministry with less than a dozen employees in a nondescript corner of Krishi Bhawan, the department of cooperation’s morphing into a full-fledged ministry last week, with Amit Shah at its helm, is seen as having not just political but economic ramifications.
There are about 8.5 lakh co-operatives in the country with roughly 38 crore members. Of these, 1,539 are urban cooperative banks (UCBs) and 97,006 rural ones with a combined asset size of as much as Rs 17-18 lakh crore, an official source told FE.
These cooperative banks, both urban and rural, account for an overwhelmingly large share of the cooperative sectors’ finances. While many of them are starved of capital and riddled with management woes, the co-operative banking sector, as a whole, still retains much financial as well as political clout over voters at the critical grassroots level. Against this backdrop, the Centre’s bid to regulate policies governing co-operatives through the new ministry assumes significance.
Some of the large UCBs are cash-rich, and this makes them a potent financial force. The deposit base of UCBs stood at Rs 5 lakh crore as of March 2020 (deposits constitute about 90% of the cooperatives’ resource base). Their loan portfolio was as high as Rs 3 lakh crore at the end of FY20, constituting a sizeable share of credit flow in the overall cooperative sector, mainly to agriculture.
Similarly, the UCBs’ cash reserves grew 7.9% on year to Rs 5,812 crore in FY20 and balances with banks rose 8.6% to Rs 66,212 crore. Their investments stood at Rs 1.62 lakh crore in FY20, 60% of which were in central government securities and another 27% in state government papers. Their asset size stood at Rs 6.2 lakh crore as of March 2020.
Once the financials of rural co-operative banks are included, the asset size sees a substantial jump. These rural co-operatives make up 65% of the total asset size of all co-operative banks put together, according to an RBI assessment.
Given the financial prowess of many of the co-operatives and the sheer large number of their members, the political parties that exercise considerable control over them potentially have a significant advantage over others in times of elections. For instance, the Congress and the NCP have tremendous clout over them in Maharashtra, the BJP in Gujarat and the Left parties in Kerala.
No wonder, opposition parties have called the move to carve out the ministry of cooperation from the agriculture ministry a “political mischief” and an onslaught on the country’s federal structure. Co-operatives, being a state subject (the Union government’s role is mostly restricted to multi-state co-operative societies), should be overseen by the states and the new ministry must not be used to usurp their power or curb their innovation, they say.
For instance, to fund development activities and ease credit flow to farmers, Kerala formed the Kerala Cooperative Bank (KCB) (branded Kerala Bank) by merging district cooperative banks. The KCB is now the country’s largest cooperative bank with as many as 820 branches. The state’s ministry of cooperation lists as many as 11,892 cooperative societies that function across sectors, including agriculture, dairy, industry and services such as banking and hospitality.
More importantly, many of the cooperatives, thanks to their opaque structure and severe governance issues, are allegedly used to funnel black money. The crisis at the Punjab Maharashtra Co-operative (PMC) Bank and some others in recent years are a testament to it.
Of course, the government last year amended the Banking Regulation Act to bring urban and multi-state co-operative banks under the RBI regulation. While the move aims to protect the interests of depositors and better scrutinise the affairs of these cooperative banks, given the enormity of the task, strict supervision and regulation will take some time to evolve to the desired standards. Moreover, the sphere of the RBI regulation is limited to only those offering banking services and doesn’t cover the entire universe of co-operatives.
According to the notification issued by the government, the new ministry will deal with general policy in the field of cooperation while other relevant ministries will be responsible for cooperatives in their respective fields. For example, IFFCO will continue to be driven by the policies of the fertiliser ministry and Gujarat Cooperative Milk Marketing Federation (Amul) by the dairy ministry. Agri cooperative Nafed, which undertakes the procurement of oilseeds and pulses, will remain with the agriculture ministry.
So, the new ministry will get to oversee the central registrar of cooperative societies that regulate and govern all multi-state cooperative societies, a function that was earlier undertaken by the agriculture ministry.
The step assumes significance as some of the financial companies were allegedly converted to multi-state cooperatives to evade regulating authorities like RBI and Sebi.
As of December 2020, there were 1,469 registered multi-state co-operative societies. Maharashtra led the pack of states with 622 of them, followed by Delhi (153), Uttar Pradesh (149), Tamil Nadu (124) and Rajasthan (74).
Rejecting criticism of the move, government officials say the much-neglected co-operative sector will get its due share of attention now following the formation of a dedicated ministry and catalyse a bottom-up growth approach. It will bolster the country’s cooperative movement and deepen its reach at the grassroot level, they add.
The penalty on Andhra Pradesh Mahesh Co-operative Urban Bank was for non-compliance with directions issued by RBI contained in Master Directions on ‘Interest Rate on Deposits’ and ‘Know Your Customer’.
The Ahmedabad Mercantile Co-operative Bank has been penalised for violation of norms contained in Master Directions on ‘Interest Rate on Deposits’.
As per the RBI, it imposed penalty on SVC Co-operative Bank for non-compliance with directions on ‘Interest Rate on Deposits’ and ‘Frauds Monitoring and Reporting Mechanism’.
Saraswat Cooperative Bank was penalised for non-compliance with directions on ‘Interest Rate on Deposits’ and ‘Maintenance of Deposit Accounts’.
The penalties, the RBI said, have been imposed for based on deficiencies in regulatory compliance and are not intended to pronounce upon the validity of any transaction or agreement entered into by the banks with their customers.
The indicative key risks in outsourcing that need to be evaluated include strategic, reputation, compliance and operational risks, among others.
The Reserve Bank of India on Monday released guidelines for co-operative banks to manage risks that could arise from outsourcing of financial services. The regulator said the chief executive officer and the senior management of co-operative banks would be responsible for evaluating risks and materiality of all existing and prospective outsourcing activities.
The regulator specified that a bank shall retain ultimate control of outsourced activities. Co-operative banks will now have to conduct a self-assessment of their existing outsourcing arrangements and bring the same in line with the guidelines released on Monday within six months.
“The underlying principles behind these guidelines are that the co-operative bank should ensure that outsourcing arrangements neither diminish its ability to fulfil its obligations to customers and the RBI, nor impede effective supervision by Reserve Bank of India (RBI)/ National Bank for Agriculture and Development (NABARD),” the central bank said on Monday. These guidelines are not applicable to technology-related issues, it added.
The RBI has also made it clear that co-operative banks shall be responsible for the actions of their service provider, including actions of business correspondents and their retail outlets/sub-agents. The grievance redressal mechanism of co-operative banks should not be compromised on account of outsourcing.
Co-operative banks will also need to put in place a management structure to monitor and control outsourcing activities. The indicative key risks in outsourcing that need to be evaluated include strategic, reputation, compliance and operational risks, among others.
A co-operative bank intending to outsource any of its financial activities will need to put in place a comprehensive outsourcing policy approved by its board. If a service provider’s contract is terminated prematurely prior to the completion of service, the Indian Banks’ Association (IBA) would have to be informed with reasons for termination. The IBA would be maintaining a caution list of such service providers for the entire banking industry for sharing among banks.
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