`551 mn covid gold loans in 7 months
Gayatri Bank is making impressive growth and has started the trading of government securities during 2020-21 which earned ` 97.98 million:
The covid pandemic has brought an unexpected stress on the balance sheet of Gayatri Cooperative Bank. The lock down and the resultant situation impacted businesses except agriculture, which impacted the economy. There has been no pickup in most of the businesses. Most of the bank’s customers are from the agriculture sector and the current pandemic situation coincides with the harvesting of the crops. Vanamala Srinivas, CEO of the bank, says the Government of Telangana has purchased crops directly from the farmers and remitted the procurement price into the bank accounts of the farmers. “We have received `1.17 billion on this account across out branches,” he says.
The bank has introduced new scheme called ‘Covid Gold Loan’ with discounted rate of interest at 9.5% p.a. for an amount up to `100,000 per customer. The bank already had a gold loan scheme with 12% interest and the special ‘Covid gold loan’ is targeted at middle class people and was introduced on 3 September 2020. Says Srinivas: “This scheme has received tremendous response. Just within 7 months of launching the scheme, we could advance `551 million, out of a total `1.21 billion of growth in total loans & advances during the last financial year. Our profitability got stabilized and also CD ratio reached to 65.41%.”
B/S GROWTH
At the end of the last FY, the bank’s total deposits increased to `10.09 billion from `8.19 billion and total loans & advances grew to `6.6 billion from `5.39 billion The growth in balance sheet of the bank has been coming down from 42.79% for the 201718, to 32.81% for 2018-19 and to 27.2% in 2019-20. The bank achieved 22.72% growth in the balance sheet during the pandemic affected 2020-21. Its share capital is up by 2.24 times to `505 million in the past 4 FYs.
ASSET QUALITY: GNPA DOWN
Most of the bank’s borrowers are availing of the moratorium on loans introduced by the RBI as part of the package introduced to help businesses impacted by the pandemic. The bank has been trying to convince common people to pay at least the interest amount during the moratorium period to lessen their interest burden. Srinivas points out: “Even though the recoveries in the NPA accounts is very low due to the pandemic situation, we are also unable to proceed with the legal actions. The common people are unable to pay the EMIs in the prevailing situation. To keep the asset quality standard and not to let it slip into NPA category, adequate measures are initiated with an increased focus on recovery. This will be a plus point in maintaining the liquidity position of the bank, and simultaneously lessen the burden of the customers. We strived hard and brought down the gross NPA from 3.53% to 2.75% at the end of 2020-21.”
LIQUIDITY: G-SEC TRADING
Because of the increase in deposits and low movement in loans & advances, there is sufficient liquidity in the bank. Hence the CD ratio was 58.69% as on 30 June 2020. Srinivas says as there has been very less movement in the retail, small business and housing sectors, the bank is not getting enough scope for fresh lending.
The bank’s board had decided to compensate the overall yielding by earning from trading of government securities. “By analyzing the asset liability management reports and based on the maturity time buckets, we had invested our surplus funds in treasury bills and government securities to get quick liquidity,” says Srinivas.
A decrease of CRR from 4% to 3% by RBI has resulted in increased availability of funds on the cash management side. The bank has also started trading of government securities during 2020-21 and earned `97.98 million by the end of this FY.
CAPITAL ADEQUACY
Due to the restrictions on paying dividend, the bank is finding it difficult to increase its share capital. As Srinivas says, the bank is focused on low-risk lending products like gold loans, government securities and treasury bills. “We are able to maintain our capital adequacy at 14.64% for 2020-21 because of these measures,” he says.