There are media reports stating that the National Bank for Agriculture and Rural Development (NABARD) has issued a letter indicating that if there is no improvement in the financial health of certain District Cooperative Central Banks (DCCBs) in Madhya Pradesh, it may recommend to the Reserve Bank of India (RBI) for revoking their licenses.
Eleven district cooperative central banks in the state are reportedly facing closure as they continue to incur massive financial losses.
In a letter addressed to the Chief Secretary of Madhya Pradesh, NABARD’s Mumbai headquarters expressed particular concern about the financial conditions of the District Cooperative Central Bank in Sidhi and several other districts.
The letter suggests that if immediate corrective measures are not implemented to improve these banks’ financial conditions, NABARD may recommend that the RBI cancel their licenses.
According to the letter, the Sidhi District Cooperative Central Bank currently faces a financial loss of Rs 546.96 crore and suffers from various operational shortcomings. The bank’s Capital to Risk Weighted Assets Ratio (CRAR) has significantly declined, from -15.90% on March 31, 2022, to -122.61% by March 31, 2023, far below the RBI-mandated minimum of 9%.
Commenting on the matter to one of the Indian Cooperative correspondents, MP State Cooperative Bank MD (I/C) Manoj Gupta stated, “We have yet to receive a copy of this letter, but we have heard that NABARD has raised concerns about the financial position of certain DCCBs in the state” he said.
“There are 38 DCCBs in the state, but the financial positions of 11 are not up to the mark. The MP State Cooperative Bank is making all efforts to revive these banks. Although these 11 banks are also making efforts to recover, it may take around 3-4 years to stabilize them. The Guna and Bhind DCCBs are earning marginal profits, but their performance on other parameters is still lacking,” he added.
Gupta also mentioned, “Previously, the MP State Cooperative Apex Bank requested Rs 1,000 crore as share capital and an additional Rs 600 crore for outstanding procurement dues from the state government to stabilize the banks’ finances” he informed.
It is worth recalling that a major fraud of Rs 100 crore occurred two years ago at the Shivpuri District Cooperative Bank in Madhya Pradesh, where a peon, acting as a cashier, embezzled funds. The investigation into this case is ongoing, and several arrests have been made.