Banks and Ker­ala floods

Banking Frontiers - - News - Vraghu­ra­[email protected]

Banking Fron­tiers looked at the re­cent im­pact of floods in Ker­ala in the op­er­a­tions of banks in 2 dis­tricts – Thrissur and Malap­pu­ram:

The re­cent floods in Ker­ala have been quite dev­as­tat­ing, caus­ing con­sid­er­able amount of dam­age to both life and prop­erty. While the ex­act mag­ni­tude of the losses is not fully known, in­di­ca­tions are that it would run into bil­lions of ru­pees. Thrissur and Malap­pu­ram have been two of the dis­tricts in the state that were badly af­fected and bankers from these two dis­tricts say banking op­er­a­tions have been im­pacted very badly.

T.K. Dileep­ku­mar, gen­eral man­ager, Irin­jalakuda Town Ur­ban Co­op­er­a­tive Bank (ITU Bank) in Thrissur dis­trict, says the in­ces­sant rains and con­se­quent flood­ing did prevent the staff from at­tend­ing of­fice for 2 days and con­se­quently all op­er­a­tions in the branches and head of­fice had to be sus­pended. Two of its 19 branches – An­na­manada and Kat­toor – could not func­tion as they were flooded. Also, 2 of the bank’s ATMs got sub­merged in flood wa­ters and be­came dys­func­tional. He adds that at present, things are bet­ter and re­turn­ing to nor­mal with all the branches func­tion­ing nor­mally.

IM­PACT OF VAR­I­OUS SEC­TORS

Dileep­ku­mar main­tains that the floods have im­pacted all the ma­jor sec­tors – agri­cul­ture and al­lied ac­tiv­i­ties, re­tail trade, in­clud­ing con­sumer loans for ve­hi­cles and small in­dus­tries – and fresh dis­bur­sals have been af­fected as the bor­row­ers could not come to the branches. How­ever, he is con­fi­dent there could be a spurt in the de­mand for fund­ing in the im­me­di­ate fu­ture as there will be need for as­sis­tance to build de­stroyed homes and pur­chase house­hold ap­pli­ances. Many of the bank’s bor­row­ers have lost heav­ily in the floods. While the bank has not fully cal­cu­lated the dam­age, he feels the losses could be around `7 mil­lion. How­ever, most of the loans are in­sured and the bor­row­ers could re­ceive com­pen­sa­tion from the in­sur­ance com­pa­nies.

Dileep­ku­mar feels re-sched­ul­ing of debts is one way of mit­i­gat­ing the suf­fer­ings of the flood-af­fected bor­row­ers, but loans granted to BPL (Below Poverty Line) bor­row­ers could get stuck and, per­haps, have to be writ­ten off. Re­pay­ment sched­ules of all the other loans could be ex­tended and re­cov­ery can be ex­pected.

Dileep­ku­mar said the bank’s data cen­ters were not af­fected by the floods as the servers were lo­cated on the up­per floors of the head of­fice build­ing and all the data res­i­dent on the servers was safer and se­cure. He does not ex­pect to face any prob­lem on ac­count of data loss.

IN­SUR­ANCE IS NE­C­ES­SARY

He urges in­di­vid­ual bor­row­ers to have all their house­hold items and ap­pli­ances in­sured so that fi­nan­cial dam­age is min­i­mum in case of such an ex­i­gency in fu­ture. Even larger bor­row­ers should not un­der-in­sure their goods and other prop­er­ties to save money as this could lead to avoid­able losses. The bank, on its part, is also tak­ing ne­c­es­sary steps to en­sure that all its prop­er­ties are ad­e­quately in­sured against nat­u­ral dis­as­ters. Be­sides, it is felt that wher­ever fea­si­ble, data cen­ters would be housed only in up­per floors of the build­ings.

For Kot­takkal Co­op­er­a­tive Ur­ban Bank in Kot­takkal in Malap­pu­ram dis­trict, the story is not very dif­fer­ent. As the dis­trict was one of the worst-hit in the floods, some of the bank’s branches could not func­tion at all for a few days as staff also could not get to work. The branches them­selves were flooded be­cause some of them were lo­cated in low-ly­ing ar­eas and were flooded. How­ever, as the bank’s pro­fes­sional di­rec­tor K. Mo­hamed Saleem puts it: “The dis­rup­tion was only for a few days and with wa­ter re­ced­ing fast, nor­mal op­er­a­tions were re­sumed soon.” Thank­fully’ all the 24 ATMs of the bank were func­tion­ing nor­mally dur­ing the flood-hit days.

SMALL BUSI­NESSES AF­FECTED

He es­ti­mates the im­pact on the busi­ness of the bank as a re­sult of the floods to be in the range of `2 mil­lion. Kot­takkal is place where the fa­mous Ayurveda treat­ment cen­ter is lo­cated. Saleem points out that as much as 40% of the bank’s busi­ness is from small in­dus­tries, which in­cludes those units en­gaged in the prepa­ra­tion of herbs for ayurvedic medicines.

Agri­cul­tural busi­ness, con­sti­tut­ing some 20% of its busi­ness, also took a hit. How­ever, with a to­tal busi­ness of al­most `10 bil­lion, the im­pact of the floods on the to­tal busi­ness of the bank was not size­able.

Saleem is con­fi­dent that the bank is not ex­pect­ing any ma­jor is­sues in re­cov­ery of loans and the bank’s net NPA po­si­tion is ‘very com­fort­able’ - just 1% of its to­tal ad­vances. The bank has pro­vided a sum of `1.6 mil­lion by way of tem­po­rary as­sis­tance to the flood-hit vic­tims. The bank re-sched­ule the re­pay­ment process, he says, adding the re­cov­ery process may not face much hur­dles.

Like in the ITU Bank, the com­puter sys­tems of Kot­takkal Co­op­er­a­tive Ur­ban Bank are lo­cated se­curely at the head of­fice and the floods had no im­pact on the data stored. Bar­ring a few days when con­nec­tiv­ity was a prob­lem ow­ing to the floods, all the branches be­came op­er­a­tional quickly. Saleem points out that all the 24 branches of the bank are fully com­put­er­ized and con­nected the floods did not even af­fect the mo­bile banking op­er­a­tions, which were started very re­cently.

COM­MON GOOD FUND

The bank has a unique way of try­ing to fight nat­u­ral calami­ties and dis­as­ters like floods and droughts. As a mat­ter of pol­icy, it has cre­ated a ‘Com­mon Good Fund’ out of its re­sources to deal with such con­tin­gen­cies and sets apart ev­ery year a small sum out of its prof­its. At present, this fund has cor­pus of around `6.5 mil­lion and the bank has pro­vided `1.6 mil­lion out of this ac­cu­mu­la­tion as im­me­di­ate as­sis­tance to the grief-stricken and flood-hit vic­tims, par­tic­u­larly of the weaker sec­tions. Such ini­tia­tives, feels Saleem, help to mit­i­gate the dis­rup­tions and suf­fer­ings of the poor clients in the fu­ture.

Dhan­laxmi Bank is a pri­vate bank, head­quar­tered in Thrissur city. It has some 650 touch­points - branches and ATMs cov­er­ing al­most all the states. In Ker­ala alone there are 145 branches and 180 ATMs. Ac­cord­ing to T. Latha, the re­cently ap­pointed MD and CEO of the bank, only 7 to 10 of the branches and a few ATMs were ‘ma­jorly af­fected’ by the floods. Con­se­quent on the “im­me­di­ate ac­tion and close mon­i­tor­ing, all the branches were up and run­ning very quickly,” she says, adding nor­malcy re­turned very soon. In a way, the bank was, per­haps, the least af­fected in terms of dis­rup­tion of its ser­vices to the cus­tomers ow­ing to the floods.

SO­CIO-ECO­NOMIC IM­PACT

Latha main­tains that the so­cio-eco­nomic im­pact of floods on the state would def­i­nitely be af­fect­ing bank’s busi­ness. The most af­fected seg­ments would be agri­cul­ture and the MSMEs, where the bank has a sig­nif­i­cant ex­po­sure. The bank has ex­tended its sup­port to the flood-af­fected cus­tomers like waiver of min­i­mum bal­ance charges, fees and com­mis­sions. The bank has also waived the ex­change charges on re­mit­tance to the Chief Min­is­ters’ Dis­tress Re­lief Fund.

The bank al­ready has a flex­i­ble one­time set­tle­ment scheme and Latha hopes this will sup­port the flood-af­fected bor­row­ers, thereby help­ing mit­i­gate their suf­fer­ings. This scheme, she says, has been work­ing well and proved to be ef­fec­tive in the re­cov­ery of loans.

Thrissur city was not se­verely af­fected by the floods and as such there was no im­pact on the bank’s data cen­ter, which is lo­cated in the city it­self. Be­ing a re­spon­si­ble nine-decade old fi­nan­cial in­sti­tu­tion, the bank has al­ways been sup­port­ing ev­ery ini­tia­tive of the govern­ment for pro­vid­ing re­lief to the calamity-stricken vic­tims. This is part of the bank’s pol­icy and Latha in­sists this will con­tinue in the present case as well.

T.K. Dileep Ku­mar

T. Latha

Flood wa­ters in front of an ITU Bank branch

Dam­aged records and fur­ni­ture in a bank branch

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