Forty two cooperative banks, which failed to meet the Reserve Bank of India's guidelines of net worth and capital requirements have been put under the regulator's scanner.
The 42 cooperative banks have been debarred from taking fresh deposits. They'd failed to meet the 31st March deadline of meeting norms.
The banks have been put under the monitorable action plan (MAP), under which they must increase the capital adequacy. They must meet the norms by 30th September.
Under the MAP, the RBI and Nabard would keep a look at all the decisions made by the banks, which if failed to achieve the capital adequacy and net worth requirements face penalties or even cancellation of licence.
"There were about 50 banks which were facing closure threat. Of them, eight, including state-level cooperative banks, have managed to meet the norms. The remaining 42 banks are under MAP till September to work out a revival plan," said Mr. Prakash Bakshi, Chairman of Nabard.
The 50 banks under the scanner have a net advances and deposits of Rs. 18, 485 crore and Rs. 31,242 crore respectively. The NPA figures for the state cooperative banks was 8.8% for FY 2010-11, while for district central cooperative banks the figure was 12.9%. The figures for 2011-12 haven't yet been compiled.
The RBI had started tightening the norms for cooperative banks since 2008-09 by recommending a minimum capital-to-risk weighted assets ratio of 4% by March 2012, and keeping cash reserve ratio (CRR) at 4.75% and statutory liquidity ratio (SLR) at 24%.
Apart from above mandatory requirements, the banks must also manage their asset quality and reduce NPAs, and have a minimum specified net worth.
The 42 banks failed to meet these requirements.
Since the last fiscal, nearly 90 cooperative banks have been penalized or had their licences cancelled.
"The best way to manage this situation is to merge these banks and ensure that they are run by professionally run managements. The whole process should be done in an orderly manner without creating panic among customers," said Mr. Viren H. Mehta, a partner with SR Batliboi and Company.