Urban Co-op Bank profiles improve on bad loan dip, better profitability

The profile of urban co-operative banks (UCBs) improved in 2021-22 on the back of augmented capital buffers, a decline in bad loans and improved profitability.

However, the growth in deposits and advances took a knock as liabilities shrunk on the back of high base in 2020-21, according to RBI’s Report on Trend and Progress of Banking in India.

The combined net profit of UCBs was up 85 per cent to Rs.2,881 crore in 2021-22.

Also, the Amalgamation of a large debt-ridden and stressed UCB (Punjab & Maharashtra Coop Bank) with a small finance bank also helped improve profitability.

On the other hand, the increase in non-interest expenditure, especially staff costs, coupled with a sharp reduction in non-interest income, had a moderating influence.

The Asset quality of UCBs, measured by the gross non-performing assets (GNPA) ratio showed improvement for the first time since 2012-13. They had continuously deteriorated during 2015-16 to 2020-21 before improving in 2021-22.

The provisioning requirements have also reduced. UCBs showed prudence and their provision coverage ratio increased year-on-year, although it still remains below that of commercial banks.