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Last Updated Monday April 23 2018 02:45 PM IST

Bad loans bog down cooperative banks in Kerala

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Money Bad loans are tanking the cooperative finance sector in Kerala: Representative image

Kannur: The Kerala state cooperative bank and the district cooperative banks are struggling with bad loans amounting to more than Rs 700 crore.

Most of this money has been lent to cooperative institutions at the behest of the state government.

The cooperative banks have been trying to get their books in order to comply with a circular from the registrar to be prepared for the formation of an amalgamated Kerala Bank.

The banks have reclaimed small loans by restructuring them but the big guns are proving to be a thorn in the flesh.

Many of the borrowers have become non-existent.

The banks are in a quandary as they can’t even go for attachment procedures as several borrowers do not have enough assets to make up for the money they owe.

Cooperative banks are known to yield to government pressure to lend to organizations in violation of Nabard guidelines that require them to look at the potential borrower’s ability to repay loans and the collateral they could offer.

Many organizations were offered credit lines even after they were blacklisted by other banks.

The biggest defaulter is the Kannur-based Kerala State Rubber Co-operative Ltd (Rubco). The cooperative owes Rs 313 crore to various banks in the cooperative sector.

The state cooperative bank has lent Rs 135 crore to the Rubco, while the district cooperative banks in Ernakulam, Kottayam and Palakkad have lent Rs 110 crore, Rs 40 crore and Rs 28 crore, respectively.

The Kerala State Cooperative Rubber Marketing Federation owes the banks Rs 90 crore, while the Market Fed owes Rs 70 crore. Agrico (Rs 35 crore), Ramps Maithri (Rs 65 crore) and the Consumer Fed (Rs 5 crore) are the other major defaulters.

The state government may be forced to take over the bad loans if it were to proceed with the plan to merge them into a Kerala Bank.

Read more at: Latest in Business | Don't foresee more changes to GST rates in next few months: Adhia

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