'Abhyudaya Coop Bank net NPA at 12%; professional team can clean up balance sheet'

'Abhyudaya Coop Bank net NPA at 12%; professional team can clean up balance sheet'

Abhyudaya Cooperative Bank's net non-performing assets (NPAs) ratio have zoomed up to 12 per cent, sources said on November 25. A day after the Reserve Bank superseded the city-headquartered bank's board, it has emerged that the cooperative bank's cost-to-income ratio had zoomed up to 80 per cent.

The RBI order on November 24 had superseded the board for 12 months on material concerns emanating from poor governance standards observed in the bank" but refrained from putting any business restrictions. They placed an administrator and an advisory panel to assist him.

People in the know said that poor governance led to gradual accumulation of NPAs and deterioration on the cost-to-income ratio. According to sources, the bank management led by chairman Sandeep Ghandat had hired excessively to win over voters in the Parbhani district of Maharashtra, which is a political base for the family.

In what should allay any concerns among customers, sources said the bank had made an operating profit in FY23, and has a sizeable proportion of the deposits in the low-cost current and savings account. The bank has also consistently maintained the statutory liquidity ratio and cash reserve ratio, those in the know said.

With the professional team looking after the day-to-day affairs of the bank, it will recover its bad loan to clean up its balance sheet and also improve operating efficiency," a person in the know said. The person added that Abhyudaya Bank will continue its normal business as there are no restrictions placed on it.

On November 24, there were reports saying that the RBI has agreed to open its currency chest for the next three days in order to ensure that all the ATMs of the lender dispense cash as sought by the depositors. The regulatory move against the bank was one of the biggest such actions against any cooperative lender after the PMC Bank case, where strong restrictions were put on the depositors as well.