Cooperative banks’ assets nearly halve to 10.6% in FY19 from FY 05: RBI

As more and more cooperative banks go belly up, their combined assets nearly halved to 10.6 per cent of the assets of commercial banks in FY19 from 19.4 per cent in FY05, as per an RBI report released on Tuesday. September saw one of the biggest cooperatives, the city-based PMC, going belly up after a massive scam.

Almost 73 per cent of its assets at Rs 6,500 crore of Rs 11,800 crore that was given to the crippled HDIL group turned into non-performing assets. The bank since then has been under an RBI administrator. In fact, PMC is only one of the three dozens of cooperatives gone under since January this year.

However, the combined balance sheet of urban and rural cooperative banks saw robust expansion in FY19. Despite their large numbers, urban cooperatives account for just 3.6 per cent of the total assets of commercial banks as most of them are single branch entities, with limited avenues to raise capital.

Deposits, which accounts for 89.5 per cent of their resource base revived in FY19 after a deceleration in FY18. Nonetheless, their deposit growth remains well-below the average of 13.9 per cent achieved between FY08 and FY17, the RBI in its annual report on the trends and progress of banks in FY19.

During FY17 and FY18, the incremental credit-to-deposit ratio of urban cooperatives rose above those of commercial banks, owing to the impact of high deposit growth on account of demonetisation and lower credit growth of bank in the next year. This upturn was, however, reversed in FY19 with a pick-up in credit growth of banks. On the financial profitability, the report said urban cooperatives saw a decline in net profit after taxes in FY19.

Similarly, on the asset quality front too, the cooperatives performed badly with their gross NPAs rising to 7.1 per cent from 6.7 per cent but the net NPA ratio improved to 2.6 from 2.8, while the provision coverage ratio improved to 65.6 from 63.4. As of March 2019, there were 1,544 urban co-operative banks, and 96,248 rural co-operative banks in the country. The latter accounted for 64.7 per cent of the total assets of the co-operative sector.