Kannur: The much-hyped Kerala Cooperative Bank could end up as a drag on the sector, a top banker has said. The state cooperative bank managing director has written to the National Bank For Agriculture And Rural Development (NABARD) that the proposed entity could incur a loss up to Rs 218.48 crore.
The report, submitted to NABARD general manager two months ago, points out that the Kerala Cooperative Bank was just a merger among the cooperative banks at the state and district levels. The managing director has included various balance sheets to substantiate his claim.
Even as the political establishment, including the cooperative minister, insisted that the new bank was on the way, the top banker’s report casts a doubt upon the proposal by dissecting the investments, credits, shares and capital of the cooperative banks in the state.
The existing state-level cooperative bank and the district-level banks have a combined investment of Rs 63,502 crore. The formation of the proposed Kerala Cooperative Bank will eventually lead to the closure of 15 to 20 percent of the bank branches. The new bank will have regional offices in Thiruvananthapuram, Kochi and Kozhikode.
The merger of the money-losing cooperative bank with the district banks was detrimental to the interests of the shareholders and account holders. Even those banks which have been distributing dividends of at least 10 percent will be plunged into the red after the merger.
The merger will also be a setback for modern banking services such as ATM cards and electronic transfer.
The Kerala government has told the Reserve Bank of India that the state cooperative bank would turn a profit within the next five years. The government expects the central bank to give its stamp of approval to the new bank on the base of its report.
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