As of December 2021, all cooperative banks in Kerala, largely controlled by the ruling Left Democratic Front (LDF), reported non-performing assets (NPAs) totaling Rs 20,324 crore, constituting a significant 38.3 percent of their advances, according to data released by the State Level Bankers’ Committee (SLBC). The figures highlight a stark contrast with commercial banks, including PSU banks and private sector banks, which reported NPAs of just 3.99 percent of their total advances during the same period.
Among the cooperative banks, the Kerala State Cooperative Agricultural and Rural Development Bank Ltd recorded a striking 88 percent of advances as NPAs. In comparison, the Kerala State Cooperative Bank (KSCB), known as Kerala Bank, reported a 30 percent NPA figure, which includes 13 district cooperative banks under its umbrella. The president and vice-president of Kerala Bank, Gopi Kottamurickal and M K Kannan, respectively, are affiliated with the Communist Party of India (Marxist).
As of December 2021, Kerala Bank had NPAs totaling Rs 12,403 crore against advances of Rs 41,544 crore. Similarly, the Kerala State Cooperative Agricultural and Rural Development Bank Ltd, inclusive of primary cooperative agriculture and rural development banks, reported NPAs amounting to Rs 6,990.74 crore against advances of Rs 7,954.73 crore.
The collective NPAs of the cooperative banks, including KSCB and Kerala State Cooperative Agricultural and Rural Development Bank, amounted to Rs 20,324 crore against loans totaling Rs 53,032 crore. This high percentage of bad loans, constituting 38 percent of advances, raises concerns about sustainability, and a banking source noted that such a level would typically prompt the Reserve Bank of India (RBI) to initiate prompt corrective action (PCA), a measure applicable to commercial banks facing financial stress.
The merger of district cooperative banks with Kerala State Cooperative Bank, rebranded as Kerala Bank, began on November 29, 2019. The issue is exacerbated by political interference in loan processes, with party workers reportedly influencing loan sanctions and disbursements. Recovery levels are noted to be very low.
Under RBI norms, a loan account is classified as NPA when the principal or interest remains overdue for 90 days. Kerala Bank Chief General Manager K C Sahadevan mentioned that their NPAs had been reduced to 12 percent by the end of the last fiscal year (March 2021-22) through a special recovery drive. He expressed a commitment to further reduce NPAs to 7 percent by the end of the next fiscal year and clarified that Kerala Bank had not written off any bad loans since its formation in November 2019.