Nishikant Khajuria
JAMMU, June 12: As the Citizens Cooperative Bank Ltd (CCBL ) Jammu shows continuing deterioration in its financial parameters registering a surge in the net loss and consequent accumulated loss for the financial year 2014-15, the Reserve Bank of India has pointed out various deficiencies in system as well as management of the bank seeking remedial measures.
Data submitted by the bank since April 2014 shows continuing deterioration in its financial parameters with operating expenses exceeding total income and net loss surging to Rs 4.36 crores and accumulated loss rising to Rs 11.42 crores as on February 2015, observes the RBI in its inspection report with reference to latest financial position of the bank.
This is for the first time that the CCBL has registered an operating loss for a financial year even as the accumulating losses were rising gradually ever since the taking over of new board of directors of the bank.
Major findings of the report, a copy of which is in possession of the Excelsior, disclose that the CCBL did not have adequate risk capital with the CRAR and the bank was scrupulously not adhering to the RBI prudential IRAC norms as well as exposure limits on single borrower while the credit appraisal system and post disbursement supervision continued to suffer from various deficiencies.
Further, the report adds, the bank had no system to pick up the incipient indications as regards deterioration of the quality of its loan assets while the return on Average Total Assets, Average earning assets and profitability per employee had been zero during the period under review.
Even as the bank had constituted various committees to look after different functioning areas, except loan committee and settlement committee; the functioning of other committees was not considered satisfactory, observes the RBI inspection report, which also points out systemic as well as Accounts specific deficiencies in different types of loans.
While coming to the management, the RBI report points out that the bank has not held any AGM since the formation of its Board in violation of its own bye law number 9.1 while dissension was observed in the functioning of the board with one group accusing the other of monopolizing the proceedings. “Under the review period, the bank created a post of General Manager in the top management without proper approval from the RCS and the same was filled up by giving promotion to an existing Chief Manager in its board meeting dated June 18, 2013 and within a month, granted various powers to GM thereby undermining the authority of MD and creating an alternate power center in gross violation of its own bye law number 12.6. The board vide its resolution dated October 25, 2013, further authorized the GM to attend the board meetings trespassing the authority of the MD who is member secretary and the only non executive member of the board,” observes the RBI.
Pertinent to mention here that the inspection of CCBL Jammu was conducted by RBI under Section 35 of the Banking Regulation Act, 1949 (AACS) between February 26, 2015 and March 23, 2015 with reference to its financial position as on March 31, 2014 (DPI). For this purpose, the bank’s Head Office and seven branches were visited.
According to the report, the investment policy of CCBL lacked some essential ingredients, such as fixing of various exposure limits on holding of investments under HRM, AFS & HFT categories, defining the tolerance limits for loss/gains, the extent and the kind of risks the bank can be exposed to, specify limits for investments in different categories of the securities, risk parameters, cut loss limits for holding/divesting the investments for non-SLR investment etc. Further, the perusal of all investment transactions by the Board was being done on quarterly basis instead of at least on monthly basis while the bank had not forwarded any half yearly review report of investment to RBI for the year ending March 31, 2014 despite guidelines for the same, report said.
Even as the RBI has expressed satisfaction over loan policy of CCBL, the inspection report points out that there was no system of verifying the veracity of personal statements made by the borrowers while the bank was not obtaining NOC/No dues certificate from all borrowers. In some cases, credit facilities were sanctioned or enhanced to borrowers without regard to their financial standing and business turnover resulting in disproportionate financial leverage with consequent financial risk and adverse effect on the future conduct of the account, report added and further said that there was no system of unit visit of verifying of stock statements submitted except at the time of sanction or renewal.
Observing that the net NPAs reported by the bank at Rs 620.51 lakh (5.10 percent) were assessed at Rs 762.30 lakh (6.27 percent) by the present inspection and there was continuing deterioration in its financial parameters and losses, the RBI has suggested CCBL to improve house keeping, vigorously follow up settlement of recovery cases, strengthening of loan appraisal system, etc.
Follow our WhatsApp channel