Thiruvananthapuram: The non-performing assets (NPAs) of the cooperative banks in Kerala are on the verge of crossing Rs 50,000 crore. This amount includes the interest and penal interest on the defaulted loans worth Rs 17,148.7 crore distributed by the banks over the last 15 years.
Recovery proceedings are stalled for a large number of bad loans and their interest. Around three lakh individuals have to repay their loans to cooperative banks in the state.
Significantly, 15 per cent of the total loans distributed by cooperative banks in Kerala have turned into non-performing assets, compared to less than 5 per cent in public sector banks. The government conducted a district-wise survey of NPAs in cooperative banks with the intention of reducing the rate to at least 7 per cent and came up with the figure of Rs 50,000 crore.
The government also found that Rs 3142.98 crore of the bad loans are blocked owing to delays in conducting arbitration procedures. This amount has to be recovered from 57,255 persons.
Meanwhile, the Department of Cooperation expects to collect around Rs 6,000 crore by auctioning recovered assets and carrying out mediation with borrowers to repay their loans.
Ironically, people with a strong financial background had a major share of the bad loans. The NPA mounted when these individuals deliberately defaulted on repayment of loans and administrative bodies of cooperative banks delayed recovery proceedings following political influence. Covert deals between sales officers of cooperative banks and the borrowers also led to bad loans.
To prevent such malpractices, the government has introduced a new rule under which defaulters who benefit from the one-time settlement of loans will receive the next loan only after two years. The rule was framed after the government noticed that several people were deliberately defaulting on the repayment of loans to avail of the benefit of interest waiver in one settlement and obtaining fresh loans from the same bank by influencing the governing body.
In another move, the government has made it mandatory for cooperative banks facing a crisis to immediately return an amount of up to Rs 5 lakh to depositors within 15 days. It has also directed all cooperative banks to join the guarantee scheme citing this condition. An individual having accounts in multiple banks will receive this temporary aid from each of the banks. An official order said that the Registrar of Cooperatives would block deposits accepted by cooperative banks which fail to join the guarantee scheme and impose a fine on them.