State Co-operative Agriculture and Rural Development Banks (SCARDBs) and Primary Co-operative Agriculture and Rural Development Banks (PCARDBs) presented a mixed picture in 2023-24, marked by balance sheet expansion in select areas but continued stress on profitability and asset quality, according to the Reserve Bank of India’s Report on Trend and Progress of Banking in India 2024-25.
At end-March 2024, SCARDBs were operational in 13 States with 695 branches, nearly 46.5 per cent of which were located in Uttar Pradesh. The consolidated balance sheet size of SCARDBs (net of accumulated losses) showed only a marginal improvement during the year, driven mainly by higher loans and advances and growth in other assets. However, accumulated losses increased, largely due to higher losses reported by banks in the northern region.
Financial performance of SCARDBs weakened sharply during 2023-24. Total income declined by 27.9 per cent, reversing the strong growth recorded in the previous year, primarily due to a fall in non-interest income.
While total expenditure declined by 8.9 per cent on account of lower operating expenses, higher interest expenditure and provisioning offset the gains. As a result, operating profit fell by 54.4 per cent and net profit turned negative.
Asset quality of SCARDBs also deteriorated, with the gross non-performing assets (GNPA) ratio rising to 38.3 per cent at end-March 2024 from 36.5 per cent a year earlier. Doubtful assets continued to dominate NPAs, accounting for 67.4 per cent of total NPAs.
The recovery-to-demand ratio declined to 40.8 per cent, indicating moderation in recovery performance. Regionally, southern SCARDBs performed better with higher profits and relatively healthier asset quality, while northern-region banks continued to incur losses.
In contrast, PCARDBs showed some improvement on the balance sheet front. As of end-March 2024, 609 PCARDBs were operating across eight States/Union Territories.
Their consolidated balance sheet (net of accumulated losses) expanded during 2023-24, supported by growth in investments and other assets, along with higher deposits and other liabilities.
However, PCARDBs also faced profitability pressures. Consolidated income declined during the year due to slower growth in interest income and contraction in other income, while total expenditure increased, led by a sharp rise in operating expenses.
Consequently, operating profits moderated. The northern region accounted for 74.6 per cent of total losses, whereas the southern region contributed the highest share of profits.
On a positive note, asset quality of PCARDBs improved marginally, with the GNPA ratio easing to 38.6 per cent at end-March 2024 from 39.7 per cent a year earlier. Regional disparities persisted, with the northern region recording the highest GNPA ratio and weakest recovery performance, while the southern region continued to post the lowest GNPA ratio and the strongest recovery-to-demand ratio.
Overall, the RBI report highlights that while long-term rural credit co-operatives have seen selective balance sheet expansion, high NPAs, regional imbalances and weak profitability, particularly among SCARDBs, remain key challenges, underscoring the need for focused reforms, improved recovery mechanisms and stronger governance in the sector.
