After demonetisation setback, MSC Bank now expects to sell 3 sugar mills to recover loans in Maharashtra

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Pune | Published: January 18, 2017 6:33:13 AM

Maharashtra State Cooperative Bank (MSCB) is expecting to sell at least three sugar mills that have been put up for sale by the bank under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002

MSC Bank had initially floated a tender to sell 15 cooperative sugar factories to recover R883 crore in outstanding loans. MSC Bank had initially floated a tender to sell 15 cooperative sugar factories to recover R883 crore in outstanding loans.

Maharashtra State Cooperative Bank (MSCB) is expecting to sell at least three sugar mills that have been put up for sale by the bank under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, top officials of the bank said. MSC Bank had initially floated a tender to sell 15 cooperative sugar factories to recover R883 crore in outstanding loans. However, the bank failed to attract any bids for its proposal in the wake of the demonetisation and the crisis in the sugar industry.

According to Pramod Karnad, MD, MSCB, the earlier tender floated by the bank received a poor response in the wake of demonetisation. However, there have been enquiries for the sale of three sugar mills from active buyers who have shown an interest and they have urged the bank to extend the tenure of the tender which is being considered by the bank, he said.

The mills have been put up for sale under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and the bank has called for separate tenders for each sugar factory for sale of machinery and land.

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The Reserve Price has been fixed at R473 crore for the mills. Karnad said the bank expects at least R150 crore from the sale of these three mills.

Significantly, the apex cooperative bank of the state has decided to focus on retail banking. With 7 new branches to be opened soon, the bank has decided to attract retail consumers well, he said.

MSC Bank has 41 branches at present and with the addition of the new branches, the number is expected to go up to 48 branches.

Of late the bank has been losing some of its business to other banks in terms of teacher salaries, cooperative housing societies which are now permitted to open accounts in other banks. Therefore a portion of our business which was monopolistic in nature is shifting to other banks because of which we have entered competition seriously and will pursue retail banking business as well, he said. The bank currently has deposits of R15,000 crore and advances worth R14,500 crore. The focus will be on increasing CASA so that business improves.

The bank had recently decided to admit Primary Agriculture Credit Societies (PACS) as members of the bank. The board of directors had decided to admit PACS as members which means these PACS could directly borrow crop loans from the bank in the near future subject to certain conditions. The bank has already framed a policy to admit PACS as members of the bank under certain criteria. In the first phase, the audit process has already begun for some banks in Vidarbha and Marathwada and this could soon extend to PACs in other parts of the state.

Maharashtra has some 20,000 PACS that usually borrow their crop loans from DCCBs. District Central Co-op Banks operate as the apex bank for all cooperative societies in the district and therefore, are governed by state government and Nabard. Since they are regulated by the Banking Regulations Act, they are governed by the RBI also.

DCCBs disburse some R24,000 crore worth crop loans through PACs every year, according to industry observers. This means a large quantum of the crop loans could now directly go to PACs if they are admitted as members of the MSCB.

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