The scenario is worse for rural cooperative banks, which account for around two-thirds of the total asset size of all cooperative banks taken together.
Even as customers of the Punjab and Maharashtra Cooperative Bank yesterday discovered they can not draw more than a thousand rupees due to an RBI direction, other cooperative banks in India are struggling with non-performing assets up to 38 per cent of their total loan advances. The scenario is worse for rural cooperative banks, which account for around two-thirds of the total asset size of all cooperative banks taken together, according to the Reserve Bank of India.
The State Cooperative Agriculture and Rural Development Banks(SCARDBs) and the Primary Co-operative Agriculture and Rural Development Banks (PCARDBs) had their NPAs at 25 per cent and 38.3 per cent respectively in FY18. According to the latest figures, NPAs in the PCARDBs have touched a 7-year high.
Higher NPAs deteriorate the business of the bank which eventually affects a large segment of people as the cooperative institutions play a significant role in credit delivery to unbanked segments of the population. One such incident is yesterday’s RBI direction on Punjab and Maharashtra Cooperative Bank, where the customers can not withdraw more than Rs 1,000 for another six months.
Long-term cooperatives such as SCARDBs and PCARDBs dispense medium and long-term loans for a range of activities, including land development, farm mechanisation, minor irrigation, rural industries, and housing. However, short-term credit cooperatives account for 94.3 per cent of the total assets of rural cooperatives, while the share of long term cooperatives has diminished over the years. There are 1,551 urban co-operative banks (UCBs) at end-March 2018 and 96,612 rural co-operative banks at end-March 2017.
While the UCBs strive to deliver institutional credit at affordable costs in urban and semi-urban areas, rural cooperatives provide financial services in villages and small towns by leveraging on their geographical and demographic outreach. Meanwhile, the cooperative institutions have not been growing in-line with the overall growth of the banking sector. At the end of March 2017, they accounted for only 11 per cent of the total assets of scheduled commercial banks in comparison to 19 per cent share in FY05.