Flush with funds after demonetisation of high-denomination currency notes in November last year, the Urban Cooperative Banks (UCBs) in Gujarat are battling with lower credit-deposit ratio as compared to their private and public sector peers in the State. The UCBs, according to experts, are striving for latest technology in banking and strong marketing push.

The credit-deposit ratio for the UCBs in Gujarat have declined from 59.6 per cent in fiscal 2015-16, to 53.1 per cent in 2016-17 after a remarkable 26 per cent growth in deposits from ₹40,183 crore in fiscal 2015-16 to ₹50,715 crore in fiscal 2016-17, a report by the Gujarat Urban Cooperative Banks Federation (GUCBF) noted.

Against the deposit growth of 26 per cent, UCBs had reported advances growth of 12 per cent from ₹23,980 crore in fiscal 2015-16 to ₹26,954 crore in 2016-17.

UCBs in Gujarat have over 1 crore depositors, which grew by about 11 per cent over last year. On the other hand, the number of borrowers declined from 6.04 lakh in 2015-16 to 5.71 lakh in 2016-17. The UCBs have members as their borrowers, who contribute a certain share of their loan amount to the share capital of the bank and become a shareholder of the UCB. These UCBs provide loans for variety of purposes including personal loan, education, vehicle as well as home loans. The decline in number of borrowers, according to experts, is a temporary phenomenon and will be overcome in the remaining half of the fiscal.

"The scenario of lower credit off-take is not limited to UCBs. We see a similar trend across the banking sector. But there are some challenges unique to the UCBs. The key among them is the technological limitations such as netbanking facility. Sometimes, we feel our marketing muscle lacks strength," said Jyotindra Mehta, Chairman, GUCBF. However, Kalupur Commercial Cooperative Bank Ltd is among the front runner in adopting net banking and mobile banking services for the customers.

The overall CD ratio of all the banks in the State fell to lowest in at least four years at 73 per cent in March 2017 against 80.19 per cent in March 2016, thereby indicating a generic phenomenon for the sector. However, looking at the current macro economic factors, the pace of revival in the credit off-take looks bleak.

DeMo a blessing in disguise

Mehta, however, stated that demonetisation came as a blessings in disguise for about 220 UCBs in the State by increasing the share of low-cost deposits in the overall deposits.

"Normally, most of deposits made during the demonetisation period was in the savings or current accounts, which are low-cost deposits. Only those term-deposits, which have higher interest rates are the costlier deposits for the banks. Previously UCBs had most of their deposits as high-cost deposits, now about 10-15 per cent on average are the low-cost deposits, giving them a comfort level," said Mehta adding that some UCBs have as high as 40 per cent share of low-cost deposits, thereby improving their profitability.

Notably, public sector and some of the leading private sector banks have higher share of low-cost deposits at around 40-45 per cent.

Meanwhile, the CD scenario in the other banks in Gujarat too remained dull. As per the latest Gujarat State Level Bankers' Committee Report (SLBC) released by the convenor Dena Bank, stated that credit deposit ratio of banks in Gujarat had declined from 79.36 per cent in June 2016 (pre-demonetisation) to 73.75 per cent in March 2017 (post-demonetisation). However, with some revival in the business activity, the CD ratio improved to 76.62 per cent in June 2017 quarter.

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