Visakhapatnam co-op bank offers free cover to its members

The Visakhapatnam Co-operative Bank Limited, one of the leading urban co-operative banks in the state, in an innovative scheme is offering free insurance cover to its members.

The 88-year old co-operative bank, which has consistently earned profits for the last two decades, is doing this because of the restrictions that have been imposed by the Reserve Bank of India on dividend payouts by co-operative banks.

During 2001-02, the bank had declared a 40 per cent dividend for its shareholders.

"The Reserve Bank of India guidelines in 2003 meant that for the last two years we have not been able to declare dividends to our shareholders even as the bank earned sufficient net profits. We have written to them requesting their permission for dividend payouts but have received no responses," Manam Anjaneyulu, chairman of the bank, told Business Standard.

"Keeping this in mind and to transfer some additional benefits to our shareholders we have introduced an insurance scheme without collecting any premium from members," Anjaneyulu said.

The bank has about Rs 26 crore in reserves and it has earned a Rs 4.5 crore net profit in 2003-04. "We had announced a 20 per cent dividend and had written to the RBI for permission but we have not yet received any response from them," Anjaneyulu said.

The Visakhapatnam Co-operative Bank has 23,000 shareholders and each member has contributed between Rs 10,000 and Rs 25,000 towards the share capital.

"At present, the bank is giving Rs 5,000 as funeral expenses, if any member expires. The bank has introduced additional insurance for its members from January 1. According to the new scheme, a shareholder who has been with the co-operative bank for a period of five years will now get an amount equivalent to their investment in the bank, if he dies, even if it is a normal death," Anjaneyulu said.

At the same time, the bank has started negotiations with public and private insurance companies like LIC, ICICI Prudential and Aviva to introduce group insurance cover to all its members for a maximum amount of Rs 1 lakh. The bank is planning to pay the entire premium for such a move from its reserves only, he said.