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Repco Bank seeks Govt nod to de-cooperatise

M. Ramesh

CHENNAI, April 8

THE Repatriates Co-operative Finance and Development Bank Ltd (Repco Bank) is considering a proposal to convert itself into a scheduled commercial bank. The bank's board has considered this proposal a couple of times and shortly, the proposal would be taken to the Government of India for approval, senior bank officials told Business Line on Monday.

The Repco Bank was started in 1969, with the objective of rehabilitating repatriates. The bank comes under the Multi-State Co-operative Banks Act and reports to the Ministry of Home Affairs, Rehabilitation division.

Its Rs 4.2-crore paid-up equity capital is held by the Government of India (51 per cent), the State governments of Kerala and Tamil Nadu (seven per cent each), and Karnataka and Andhra Pradesh (five per cent each). The rest is held by some 17,000 repatriates.

The bank has deposits of around Rs 400 crore and advances around Rs 300 crore. In the last nine years, it has consistently made a net profit and has paid the maximum permissible dividend under the Act - 15 per cent.

The bank's officials see limited scope for growth, under the current set up, hence the move to convert it into a scheduled commercial bank. Then, as any other bank governed by the Banking Regulations Act, the Repco Bank would be able to expand its products and geographical range of activities (both of which are today restricted) and also be eligible to borrow from the RBI and other lending institutions.

But the two board members who are representatives of repatriates are apprehensive that the bank should not lose sight of the objective with which it was set up - to rehabilitate repatriates. Today, registered repatriates get a concessional rate (of around 13.5 per cent), but the bank feels that it would be possible to function as a commercial bank and yet continue to provide a concessional rate for repatriates.

Sources in the bank said that the bank had also written to the Government of India, asking for further equity funds and also to double the authorised capital to Rs 10 crore.

The bank's capital adequacy ratio is around 10.5 per cent, comfortably more than the RBI norm of nine per cent, but funds are needed to expand business.

Sources said that the bank's NPAs are under three per cent of advances. The bank's average cost of funds works out to around 12 per cent and it lends with a margin of 3-3.5 per cent. Today the bank is able to sustain even with such high rates of interest because of a facility by which borrowers can repay a part of their loans every day, out of the business proceeds of the day.

But for the long term, growth can come only from being able to operate as a full-fledged bank, which is why the bank wants to de-cooperatise itself.

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