KOCHI:The formation of a Kerala bank through a networking of co-operative banks in the state, as proposed by CPM in its two-day congress early this month, if made possible, can turbocharge the state’s development by channelising the deposits into big development projects.
“There are no legal obstacles for such a merger. It just requires a change in the existing policy,” said Radhakrishnan M K, general manager of Ernakulam District Cooperative Bank (DCB), which alone has a deposit base of Rs 7,500 crore.
“Kerala has a three-tier system in the co-operative credit mechanism - the Kerala State Co-operative Bank at the top, 14 district co-operative banks in the middle and 2,500-odd primary co-operative credit societies at the base level.
As far as viability of such a bank is concerned, Radhakrishnan said this can be ensured by moving all the government businesses including its current deposits, welfare programmes via this new bank, thus boosting its business. Ernakulam Cooperative Bank pipped other banks in competitive bidding to sanction loan worth over Rs 400 crore to Kochi Metro which shows what these local level banks can do, if given the freedom, he said.
According to the State Level Bankers Committee (SLBC), the 14 district cooperative banks have a total deposit base of nearly Rs 41,000 crore and investment of Rs 14,300 crore. S Balachandran, managing director of Kerala State Co-operative Bank (KSCB), admitted that the task of merger would not be easy, but added that CPM politburo bureau Pinarayi Vijayan’s has kickstarted the process of a discussion on what a combined cooperative sector bank can do for Kerala’s development.
“The total deposit base of the cooperative banks in the state is to the tune of Rs 150,000 crore. Without diluting the capital adequacy and NPA norms, it would be a tough job to implement the merger,” he added.
“It will be a long-drawn process, said the MD of KSCB. A big advantage of a single ‘Kerala bank’ is that it can fund any projects in the state. At present, a district cooperative bank can finance only those projects that falls within that district.
K P Padmakumar, former chairman of Federal Bank, pointed out that the Reserve Bank of India (RBI) was slowly tightening rules on bad loans and this may come in the way of the merger. “Over a period of time I foresee more direct regulation of cooperative banking sector by the RBI. Right now, there is only an overarching control,” he said.
There are other issues as well. “Several cooperative banks are languishing. Merging them with healthy ones will also create problems,” said Padmakumar, who is now executive director with Kochi-based Muthoot Group.
The Co-op Banking Sector
■ Three-tier system : The Kerala State Co-operative Bank at the top, 14 district co-operative banks in the middle and over 2,500 primary co-operative credit societies at the base level Rs 1.70 lakh cr is the total deposits in cooperative banking sector in Kerala