Nature’s fury has destroyed Kerala’s wealth substantially, both financially and physically. Assets, more particularly private assets, built over the years have been wiped out. Banking business has suffered irreparable losses.
The banking network in Kerala is quite wide-spread having 6281 branches. Public and private sector banks abound. Kerala Gramin Bank that calls itself Kerala’s Own Bank, has over 600 offices, with the presence in all districts.
Among the local banks, Federal Bank and South Indian Bank, together have the dominant share of over 1000 branches in the state. State Bank of India has a relatively large presence too, particularly after the merger of State Bank of Travancore and its other associate banks. Two of the smaller banks, Catholic Syrian Bank and Dhanalaxmi Bank, also have a widespread presence in the state with over 250 and 150 branches respectively. The latest addition to the state’s banking sector is ESAF Small Finance Bank Ltd established in 2017, which concentrates on micro-banking to help the socially and economically deprived people.
Impact on banks
Kerala is one of the few states, which has made remarkable progress in promoting banking habits in both urban and rural areas. Its State-Level Bankers Committee proclaims they are the first state to have banking facility in all villages and cover all households. The claim is partly corroborated by 2011 Census data: out of 77.16 lakh households, 74.2 per cent have availed banking services while 73.8 per cent of rural Kerala are bank customers. At Ernakulam and Iddukki, two of the worst affected districts, these ratios are even higher at 78 per cent and 77 per cent respectively.
In towns like Muvatupuzha, 81 per cent of the households avail banking services, while Perumbavoor and Chalakudy share stands at 78 per cent. Aluva town, which has suffered huge losses, the ratio is the highest at 91 per cent. In the absence of data pertaining to an actual number of borrowing accounts or deposit accounts, these ratios provide indications as to the probable number of families which could be affected. With the total number of flood-hit houses estimated to be over 4 lakh, the picture is gloomy indeed.
Dent in banking business…
Besides the miserable plight of innumerable victims, banks in flood-affected districts also suffered major setbacks in their operations. Adding to the distress caused by the surge in NPAs, profits would decline further. State Level Bankers’ Committee has decided to hold work about the recovery of loan for three months. A one-year moratorium for crop loans and a relaxation of six months for repayment of educational loans have been announced. Few banks are waiving off penalties on late payment of monthly instalments for retail loans during August. One of the large banks, which earned big via penalty on non-maintenance of minimum balance, has announced that such a penalty would not be imposed for the time being.
Another impending setback for bankers is the probable increase in Non Performing Assets. The current NPA ratios of local banks are not very comforting as such: As on March 2018, NPA of Catholic Syrian Bank stands at 5.51 per cent, Dhanalaxmi Bank at 3.19 per cent, South Indian Bank at 2.60 per cent, Kerala Gramin Bank at 2.09 per cent and Federal Bank at 1.69 per cent. While extending credit facilities is now unavoidable, the banks should not become godowns of defaulted loans in the process. Under this situation, perhaps the Reserve Bank of India may consider the necessity of redefining NPA ratios temporarily. This may avoid the frightening possibility of banks turning into sick entities.
