THIRUVANANTHAPURAM: The state government’s efforts to make KSRTC credit-worthy to enable it to avail of loan worth Rs 3,000 crore at a lesser interest rate from the SBI-led consortium of banks are likely to hamper its own pet project - the Kerala Bank.
The government had asked the Kerala State Agricultural and Rural Development Bank to withdraw its term deposits worth Rs 1,000 crore from district cooperative banks (DCB) to repay the loans the KSRTC had availed of from DCBs across the state, before March 31.
Sources in various district cooperative banks told ‘Express’ that on March 28 the Kerala State Agricultural and Rural Development Bank withdrew Rs 1,000 crore it had deposited with the district cooperative banks and deposited the same with the Kerala State Cooperative Bank (KSCB). Following that, the district cooperative banks received crores of rupees the KSRTC had availed of as repayment on the same day.
Though the government’s move may bail out the KSRTC, it would endanger the scope of the Reserve Bank of India granting approval for the formation of Kerala Bank. Largescale withdrawal and deposit of the same with the state cooperative bank would result in a sharp fall in the capital adequacy ratio (CAR) and NPA ratio of district cooperative banks.
“In case the CAR falls below the prescribed mark, it will prompt the RBI to reject the state government’s proposal for the formation of Kerala Bank. It will affect plans to maintain the NPA by less than 7 per cent and CAR ratio by 9 per cent. Owing to holidays in a row, the huge amount cannot be lent in the money market,” an officer said on condition of anonymity.
Palakkad DCB and Ernakulam DCB received Rs 341 crore and Rs 190 crore respectively on Wednesday as KSRTC’s repayment. Other DCBs which had given loans to the KSRTC also received the repayment. Palakkad DCB general manager A S Sunil Kumar told ‘Express’ it would seriously affect the credit deposit ratio of the bank and it was likely to affect the plans for the formation of Kerala Bank.
“Maintaining the NPA and CAR ratios of district banks and KSCB under prescribed limits is important. Our bank’s NPA ratio was 57 per cent and it is likely to worsen. We are trying to clear other loans before March 31 to reduce the NPA,” he said. Rajesh, general manager, Idukki, also confirmed they had exempted the penalty for Land Development Bank’s premature withdrawal.
Kerala Land Development Bank sources told ‘Express’ it had withdrawn its deposits from district banks and transferred Rs 1,000 crore to KSCB as deposit.
As the government had insisted on exempting penalty for premature withdrawals, DCBs have already incurred a loss. With the NPA ratio making a climb, the Reserve Bank of India is likely to take it seriously while considering the state government’s proposal for Kerala Bank.