Amid the chaos of PMC Bank, a look at booming APNs; cooperative banks surrounded by bad debts

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Higher NPAs deteriorate the business of the bank, which ultimately affects a large part of the population, as cooperative institutions play an important role in providing credit to unbanked segments of the population.

Even though clients of Punjab and Maharashtra Cooperative Bank yesterday discovered that they could not withdraw more than a thousand rupees due to RBI management, other cooperative banks in India are struggling with unproductive assets. up to 38% 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.

State Cooperative Banks for Agriculture and Rural Development (SCARDB) and Primary Cooperative Banks for Agriculture and Rural Development (PCARDB) had their NPAs at 25 percent and 38.3 percent respectively during 2018 financial year. According to the latest figures, NPAs in PCARDBs reached a peak in 7 years.

Higher NPAs deteriorate the activity of the bank, which ends up affecting a large part of the population as the cooperative institutions play an important role in providing credit to unbanked segments of the population. One such incident is yesterday’s RBI leadership in the Punjab and Maharashtra Cooperative Bank, where customers cannot withdraw more than Rs 1,000 for an additional six months.

Also read: PMC Bank customers cannot withdraw more than Rs 1,000; RBI gives instructions

Long-term cooperatives such as SCARDBs and PCARDBs provide medium and long-term loans for a range of activities, including land use planning, agricultural mechanization, minor irrigation, rural industries and housing. . However, short-term credit unions account for 94.3 percent of the total assets of rural cooperatives, while the share of long-term cooperatives has declined over the years. There are 1,551 urban cooperative banks (UCB) at the end of March 2018 and 96,612 rural cooperative banks at the end of March 2017.

While UCBs strive to provide institutional credit at affordable costs in urban and semi-urban areas, rural cooperatives provide financial services in villages and small towns by taking advantage of their geographic and demographic reach. Meanwhile, cooperative institutions have not grown in line with the overall growth of the banking sector. At the end of March 2017, they represented only 11% of the total assets of the listed commercial banks, against 19% in fiscal year 05.

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