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Flush with funds after the demonetisation exercise,urban cooperative banks (UCBs) in Gujarat are battling with lower credit-deposit ratios compared with private and public sector lenders in the State.
The credit-deposit ratio for UCBs in Gujarat has declined to 53.1 per cent in 2016-17, from 59.6 per cent in fiscal 2015-16, after posting a remarkable 26 per cent growth in deposits to ₹50,715 crore in FY17, a report by the Gujarat Urban Cooperative Banks Federation (GUCBF) noted.
Against the deposit expansion of 26 per cent, the UCBs reported advances growth of 12 per cent to ₹26,954 crore in FY17, from ₹23,980 crore in FY16.
UCBs in Gujarat have over one crore depositors; the base has grown about 11 per cent over the 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. The UCBs provide a variety of loans, including personal, education, vehicle and home. The decline in number of borrowers, according to experts, is a temporary phenomenon and will reverse in the second half of the fiscal.
The UCBs, according to experts, are striving to bring in the latest technology and giving a strong marketing push. Kalupur Commercial Cooperative Bank Ltd, for instance, is among the frontrunners in adopting net and mobile banking.
“The lower credit offtake 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 net banking facility. Sometimes, we feel our marketing muscle lacks strength,” said Jyotindra Mehta, Chairman, GUCBF.
The overall CD ratio of all the banks in the State fell to its 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. With some revival in business activity, the CD ratio improved to 76.62 per cent in June 2017 quarter, though looking at the current macroeconomic factors, the pace of revival of credit offtake looks bleak.
DeMo effectMehta, however, stated that demonetisation came as a blessings in disguise for about 220 UCBs in the State by bringing in low-cost deposits.
“Most of the deposits made during the demonetisation period were in savings or current accounts, which are low-cost deposits. Previously, most of UCB deposits were high-cost deposits, now about 10-15 per cent on average are low-cost deposits, giving them a comfort level,” said Mehta, adding that low-cost deposits are as high as 40 per cent of the total deposits for some UCBs, thereby improving their profitability.
Notably, public sector and some of the leading private sector banks have higher share of low-cost deposits, at 40-45 per cent.
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