The financial background of eight district central cooperative banks in Madhya Pradesh is not good and they are on the verge of bankruptcy. National Bank for Agriculture and Rural Development (Nabard) is not refinancing them, according to media reports.
In view of the weak economic situation, a meeting of the CEOs of these eight district cooperative banks was called in Gwalior on 24 December 2019.
These banks in Gwalior, Datia, Morena, Rewa, Satna, Sidhi, Hoshangabad and Raisen Districts are facing a serious financial crisis. They are unable to comply with Section 11 (1) of the Banking Regulation Act.
According to this section, if the paid-up share capital of cooperative banks falls below one lakh rupees, they will not be able to do banking. This means that the net worth of these banks has come down to less than one lakh rupees.
The average NPA (non performing assets) of these district cooperative banks is around 25 percent. NABARD has refused to help them because they have lost eligibility.
It is being reported that there are 38 district cooperative banks in the state, out of which about two dozen are in the red.
Out of four thousand PACCS, 3200 Primary Agricultural Credit Cooperative Societies (PACS) are in loss. According to experts, this is due to mismanagement by the board members.
These banks provide 95 percent of agricultural credit loans. The recovery of loans is difficult. The loan waiver scheme had an adverse impact on these banks.
Following the change of the guard in Madhya Pradesh, the boards of District Central Cooperative Banks have been suspended.