Wednesday, April 21

Maharashtra State Co-operative Bank to enter retail banking through merger of UCB branches

PUNE: The Maharashtra State Co-operative (MSC) Bank, the apex lender in the state’s three-tier cooperative banking sector, plans to enter the retail banking sector and compete with the private sector.

It has proposed a new policy of merging urban cooperative banks (UCBs) as well, or only some branches of UCBs in some cases. So far, only district cooperative banks (DCBs) could be merged with the MSC Bank.

“We have submitted a proposal to the RBI (Reserve Bank of India) to merge the UCBs. Instead of bank mergers, we have proposed merger of only the financially weak branches of UCBs,” said Vidhyadhar Anaskar, chairman, MSC bank.

Although the proposal is yet to be cleared by the RBI, the MSC Bank has already received a proposal of merger from the Rupee Co-operative Bank.

The MSC Bank, the main lender to Maharashtra’s cooperative sugar mills, reported a turnover of Rs 40,000 crore, with own funds of Rs 3,700 crore, in the previous financial year.

To recover non-performing assets or NPAs of Rs 1,163 crore, of which sugar mills account for Rs 485 crore, the bank has announced a one-time settlement scheme. In the past it had sold some of the non-functional sugar mills to reduce its NPAs. But since it was finding it tough to sell the remaining sugar mills, it has now allowed an extended lease period of up to 25 years. “We have already given five sugar mills on lease under the new policy and some more proposals are under consideration,” said Anaskar.

Maharashtra has the country’s largest cooperative banking sector. Yet, at many places in the state, cheques from cooperative banks are not accepted. The MSC Bank wants to change the negative perception regarding cooperative banks in some quarters with a series of reforms and awareness programmes.

To save the financially weaker DCBs from closure, it has submitted a proposal to the RBI to make them banking correspondents. “We have proposed to lend directly to the primary agricultural cooperative societies, which are normally served by DCBS. We will give a rebate of 1% in the interest rate to the DCBs. This way, the NPAs of the DCBs will not increase,” said Anaskar.

The MSC Bank has also restructured its board of directors by halving the number of seats reserved for the politically controlled DCBs to six from 12 in the 21-member board. It is also in the process of acquiring land to set up India’s first university for cooperatives in Pune.

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