RBI clears setting up of 'Kerala Bank'; state expects Rs 650 bn in deposits

New bank expected to help agriculture, traditional works and self-employment sectors

The Reserve Bank of India (RBI) on Wednesday gave its nod to start that Kerala Bank, a venture proposed by the Kerala government. 

"It will be Kerala Cooperative Bank, but will be referred to as Kerala Bank. It will have all the facilities of a commercial bank, including ATMs. It will be implemented fast," said a state government source. 

Kadakampally Surendran, minister for co-operation, tourism and devaswoms, Kerala, said, "Our Kerala Bank gets the green signal from Reserve Bank of India."

"It will be safe and reliable banking for everyone. That's our motto," added Surendran.  

Kerala has consolidated the State Cooperative Bank and the 14 district cooperative banks in the state.    

Earlier, the state minister had said that he was expecting Rs 650 billion in deposits in the bank once it was formed. He had added that the aim of the new bank was to provide modern facilities to the Primary Agricultural Cooperative Societies (PACS). A task force has been formed for the establishment of the bank.  

The government has also claimed that it was able to reduce the gross losses for the Kerala State Cooperative Bank by 50 per cent during the last two years. The operating profit of the cooperative banks put together has gone up from Rs 128.3 million, as of March 2016, to Rs 1.48 billion as of March 2018. 

Earlier, the state government had formed a special task force of experts for the formation of the Kerala Bank. The expert committee was headed by Chairman M S Sriram.

The formation of the Kerala Bank would eliminate the double or repeated charges on services, which would help to provide loans to customers at a lower interest rate. This is expected to help the agriculture, traditional works and self-employment sectors and help Kerala have deposits and credits within the state. This would also help cooperative banks to overcome the limitations they face at present by implementing the latest baking facilities. The merger would increase the assets of the proposed bank, which would help it to compete with other lenders, feels the government. 

Unlike other lenders, the deposits in the Kerala Bank could be provided as credit within the state, which would help the growth of basic facilities, the minister had said recently. 

The State Cooperative Bank's net non-performing assets (NPAs), in percentage terms, as on March 31, 2017, stood at 2.52 per cent, while for district cooperative banks, it ranged between 3.81 per cent and 16.36 per cent, according to the government.