CKP Co-operative Bank has 97% NPAs; most to real estate developers

CKP Co-operative Bank, which bit the dust on May 2, has nearly 97 percent of Gross Non-Performing Assets (GNPAs), a lot of which are loans given to small and mid-sized real estate developers.

As on April 30, the bank had a loan book of Rs 158 crore and deposits of Rs 486 crore. The bank had a negative net worth of Rs 239 crore, according to the latest figures available.

Just like in the case of Punjab and Maharashtra Cooperative Bank (PMC), this bank's failure has also come as a major shocker for depositors. “The bank has about 97 percent NPAs. We tried our best. What has happened is unfortunate,” Moreshwar Dhaimodkar, General Manager of CKP bank told Moneycontrol.

The deterioration in CKP's financials finally forced the Reserve Bank of India (RBI) to revoke the lender's licence after several warnings and on account of the bank's inability to come with a revival plan. In fact, the RBI had restricted CKP Bank from taking deposits and giving new loans way back in 2014 due to financial irregularities.

Over the years, CKP Bank had built its business by lending to mostly small and mid-sized real estate developers in Mumbai, who did not pay back loans leading to a huge spike in NPAs. According to insiders, majority of the NPAs on the book are of around 10 developers.

CKP Bank has its head office at Matunga, Mumbai and has eight branches spread across Mumbai and Thane districts. “The Bank has attained an important status in the co-operative banking sector, by crossing various milestones of quality and standards and by setting new standards of its own,” its website says.

The lender is the latest cooperative bank to lose its licence on account of financial failure. Cancelling its licence, the RBI said that the financial position of the bank is highly adverse and unsustainable. Adverse financial position was only one of the many reasons behind the cancellation of the licence.

The bank, as per RBI's observation, also did not have any concrete revival plan or proposal for merger with another bank. On liquidation of the bank, CKP’s depositors can avail up to Rs 5 lakh under the modified deposit insurance scheme.

There have been a series of financial failures in the co-operative banking sector. In September 2019, following a major financial fraud, the RBI had superseded the PMC Bank. PMC had hid details of its loans from the reserve bank for a long time. Out of its total loan book of Rs 8,383 crore, as on March 31, 2019, about 70 percent was given to one real estate firm — HDIL. The PMC crisis is yet to be resolved.

Consequent to the cancellation of its licence, The CKP Co-operative Bank Ltd., Mumbai, is prohibited from conducting the business of ‘banking’ which includes acceptance of deposits and repayment of deposits as defined in Section 5 (b) read with Section 56 of the Banking Regulation Act, 1949 with immediate effect.