323 frauds in UCBs, 482 in state co-op banks in FY21: FM

August 14, 2021

The number of frauds in urban and state cooperative banks dropped in FY21 from a year ago with tighter oversight by the central bank, Parliament was informed on Tuesday.

Finance minister Nirmala Sitharaman said urban cooperative banks reported 323 frauds in FY21 as against 568 in the previous year and 1,193 in FY19. Similarly, state cooperative banks witnessed 482 frauds in FY21, down from 508 in the previous fiscal but much higher than the FY19 level of 290, she said in a written reply to a question.

While Maharashtra, home to the highest number of cooperatives, accounted for 67% of the fraud cases in urban cooperative banks in FY21, Kerala made up for 44% of the frauds in state cooperative banks.

The finances of cooperative banks came under heightened scrutiny recently after the government carved out the department of cooperation from the agriculture ministry to make it a full-fledged ministry under Amit Shah.

Before that, affairs of the cooperative sector came under focus following the crisis at the Punjab Maharashtra Cooperative (PMC) Bank in 2019. This had prompted the government to amend the Banking Regulation Act to empower the RBI for more effective regulation of cooperative banks. The idea was to better protect the interests of depositors and avoid a PMC Bank-like crisis in future.

The amendment was also aimed to ensure that the “affairs of the cooperative banks are conducted in a manner that protects the interest of depositors by increasing professionalism, enabling access to capital, improving governance and ensuring sound banking through RBI’, Sitharaman said in the reply.

Last month, the minister had told the Rajya Sabha that gross bad loans of district central cooperative banks (DCCBs) were among the highest in the banking system, at 12.6% (Rs 35,298 crore) of their advances as of March 2020.

The gross non-performing assets (NPAs) of urban cooperative banks (UCBs), too, remained elevated at 11.3% (Rs 35,528 crore) at the end of March 2021. However, the gross NPAs of state cooperative banks were 6.7% (Rs 13,477 crore) as of March 2020, Sitharaman had said in a statement in the Upper House.

In contrast, the bad loan ratio of scheduled commercial banks stood at 7.5% as of March 2021, having eased from 8.4% a year before, the RBI said in its latest report in July.

There are 34 state cooperative banks, 351 DCCBs and 1,534 UCBs in the country. Many of the cooperatives, thanks to their opaque structure and severe governance issues, have been allegedly used to funnel black money for long.


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