Irinjalakuda Town Co-op Bank auditor had flagged negative CRAR, other violations

Bank

An independent auditor's report on the troubled Irinjalakuda Town Co-operative Bank, whose board was superseded by the Reserve Bank of India (RBI) early this week, reveals that the lender’s capital-to-risk-weighted assets ratio (CRAR) was negative and it has not complied with the income recognition norms.

The bank’s CRAR stood at -0.19 percent as of March 31, 2025, far below the RBI’s mandated 12 percent for Tier 2-4 urban co-operative banks, the report said.

The bank’s core banking solution (CBS) was not fully aligned with the RBI’s circular on “Prudential norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances – Clarifications”, it said.

Reconciliations between the General Ledger (GL) balances and actual ATM cash holdings were either not carried out regularly, long-outstanding unreconciled items were present in several bank reconciliations without adequate explanation or resolution, and differences between the bank balances as per the books and as per bank statements remained unadjusted as of the reporting date, the report said.

The independent auditors report was released along with the Annual Report of FY25 in August.

On October 7, the RBI superseded the board of Irinjalakuda Bank, citing concerns over the lender’s deteriorating financial health and governance issues.

The action was “necessitated due to certain material concerns emanating from continued poor financial condition and governance standards observed in the bank”, the banking regulator said.

It appointed Raju S Nair, former vice president of Federal Bank, as the administrator to manage the bank’s affairs during the period of supersession.

It also constituted a committee of advisers comprising Mohanan K, former deputy general manager of South Indian Bank, and TA Mohamed Sageer, former vice president of Federal Bank.

On July 30, the RBI told the bank not to grant or renew any loan or advance, make investment, incur any liability, including borrowing of funds and acceptance of fresh deposits, without its approval in writing. The bank was also barred from disbursing or agreeing to disburse payments and sell, transfer or dispose of any of its properties or assets.