Cosmos has acquired five UCBs
Action is hotting up in the urban co-operative banking (UCB) space, with Mumbai-based Kapol Co-operative Bank taking its first step towards an amalgamation with Pune-based Cosmos Co-operative Bank.
The aforementioned development came about nine days before the Reserve Bank of India (RBI) accorded its “in-principle” approval to Centrum Financial Services to set up a small finance bank (SFB), which in turn is expected to takeover the scam-hit Punjab & Maharashtra Co-operative (PMC) Bank.
Jyotindra Mehta, President, The National Federation of Urban Cooperative Banks and Credit Societies, observed that resolution of weak UCBs has brightened after the September 2020 amendment to the Banking Regulation (BR) Act, 1949, as an UCB can be merged with any bank, be it a SFB, universal bank or another UCB.
“Now a clear path to resolution via amalgamation is available,” Mehta said
The Kapol Co-operative Bank was placed under Directions by the RBI with effect from the close of business on March 30, 2017.
Once an UCB is placed under Directions, deposit withdrawal is capped. This brings lot of misery to the depositors as they are unable to withdraw money beyond the cap.
An UCB under Directions also cannot grant or renew any loans and advances, make any investment, incur any liability, among others. While stressed UCBs are placed under Directions by RBI to nurse them back to health, many stay under Directions for years.
Amalgamation among UCBs
Like Saraswat Co-operative Bank, which is India’s largest UCB, Cosmos Co-operative Bank too has been game for growth through amalgamation.
In the last 15 years, Cosmos Co-operative Bank, has acquired about five UCBs, including Amravati Peoples Co-op Bank (Amravati, Maharashtra), Unnati Co-op. Bank (Baroda, Gujarat), Sushil Kumar Nahata Co-op. Bank (Bhusawal, Maharashtra), and Co-op. Bank of Ahmedabad (Gujarat).
Saraswat Bank had acquired seven stressed UCBs (Maratha Mandir Co-operative Bank, Mandvi Co-operative Bank, Annasaheb Karale Janata Sahakari Bank, Murgha Rajendra Sahakari Bank, Kolhapur Maratha Co-operative Bank, South Indian Co-operative Bank and Nashik People’s Co-operative Bank) during the 2006-2009 period.
As per Kapol Co-operative Bank’s latest balance sheet, as at March-end 2020, it had deposits and advances aggregating ₹392 crore and ₹150 crore, respectively.
In FY20, the Bank’s net loss widened to ₹36 crore (₹30 crore in FY19). The multi-state scheduled bank had gross non-performing assets of ₹138 crore as at March-end 2020 against ₹141 crore as at March-end 2019. The Bank has 14 branches – 13 in Mumbai and one in Surat.
Cosmos Co-operative Bank had deposits and advances aggregating ₹15,195 crore and ₹11,503 crore, respectively, as at March-end 2020.
The Bank, which was set up in 1906, has 140 branches spread across Maharashtra, Madhya Pradesh, Karnataka, Gujarat, Tamil Nadu, Andhra Pradesh and Telangana. It reported a net loss of ₹54 crore in FY2020 against a net profit of ₹22 crore in FY2019.