An expert committee appointed by the Andhra Pradesh government has identified that around 52 banks out of the 170 urban co-operative banks (UCBs) in the state have non-performing assets (NPAs) exceeding 15 per cent of their advances.
For 12 banks the NPAs come to 10-15 per cent of advances, while 85 banks have sticky assets below 10 per cent.
The committee has also identified that 41 UCBs are in the red, 108 are profit-making and 21 banks are under liquidation. The committee has identified the weakness and strength of each bank and suggested bank-wise prescriptions to be complied within a time frame.
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The state government had earlier appointed a seven-member experts committee headed by a senior chartered accountant and Industrial Development Bank of India director K Narasimha Murthy, and including a senior official of the Reserve Bank of India (RBI).
After the collapse of the high profile Charminar Bank, a UCB which was given the status of a scheduled bank by the RBI, the chief minister, N Chandrababu Naidu, appointed the committee.
The committee, in its report, observed that there are 109 banks with a capital adequacy ratio (CAR) of more than 9 per cent, while 14 banks have CAR less than 4.5 per cent.
Some of the major reasons for the weakness of these banks included lack of trusteeship, low capital base, bogus membership, centralised sanction powers, irresponsible lending to the kith and kin, no appraisals for sanction of loans and no follow up for recovery.
Absence of board committees such as audit committee, loan committee, asset liability management committees were also identified as a major factor affecting these banks.
The committee made several suggestions relating to the management issues, state government's and RBI's roles.
The board of the bank managements should include three independent professionals drawn from the fields of finance, banking and audit to be co-opted by the board, the directors and their family members should not be allowed to borrow more than two per cent of the total advances, chief executives should have more than 10-15 years banking experience at middle and senior management levels, banks should be directed not to allow interest rates exceeding 1.5-2 per cent compared with scheduled banks' rates, were some of the suggestions made by the panel.
The Deposit Insurance and Credit Guarantee Corporation cover may be enhanced to cover deposits up to Rs 2.5 lakh and enhanced further periodically linking it to inflationary index, the committee recommended to the RBI.