Kerala Assembly: NABARD downgrading won’t affect functioning of Kerala Bank, says Cooperation Minister

Kerala Bank's rating downgrade by NABARD won't impact normal operations, focus on loans, despite concerns over district bank mergers, says Minister

Kerala’s Cooperation Minister V.N. Vasavan told the State Legislative Assembly on July 8 that the lowering of Kerala Bank’s rating from ‘B’ to ‘C’ category by NABARD will not affect the bank’s normal functioning and its ability to disburse loans, except that of individual loans above ₹25 lakh, which constitute only 3% of total loans. Also, the Reserve Bank of India (RBI) has not made any change to the bank’s ratings, he said.

He was replying to a submission from Leader of the Opposition V.D. Satheesan who said that such a situation would not have happened if the government had “listened” to the United Democratic Front (UDF)‘s arguments against the merger of district cooperative banks to form Kerala Bank.

“If a district cooperative bank existed in Thrissur, it could have intervened in the Karuvannur cooperative bank issue and implemented a guarantee scheme for customers within 24 hours. But Kerala Bank can intervene only based in directions from the RBI (Reserve Bank of India),” said Mr. Satheesan.

He further alleged that annual inspections are not being held in the bank’s member societies. On only one occasion in the past was a district bank downgraded to ‘C’ category. “Profit-making district banks were merged to form a loss-making Kerala Bank,” he alleged.

Mr. Vasavan said the NABARD’s decision was based on the inspection held in 2022-23. All of the issues pointed out will be rectified in time for the inspection for 2023-24, he added.

“The NABARD rating will not affect the disbursal of agricultural loans and other loans to cooperatives, home loans to individuals and overdraft loans. The bank is focussing on MSME loans, long-term agricultural loans, gold loans and home loans,” he said.

He said Kerala Bank posted record profits of ₹209 crore for the financial year 2023-2024. The percentage of non-performing assets (NPAs) was brought down from 30% to 11.45% for the period. The credit deposit ratio of the bank is now 71%, he said.