Co-Operative Bank Fixed Deposits
If we look at the return provided by various cooperative banks, we immediately find that they are higher than returns provided by the various nationalized and private banks. For amount less than 15 lakhs, The returns provided by various cooperatives banks, SBI and ICICI are as follows:
Bank Name/ Period 91 days-180 days 181 days to 1 Year 1 year to 540 days 541 days to 2 years 2 years to 3 years 3 years to 5 years Abhyudaya Co-operative Bank 6.50% 7.00% 7.25% 7.50% 7.75% 8.00% THE BHARAT CO-OPERATIVE BANK (MUMBAI) LTD 5.50% 6.75% 7.25% 7.25% 7.00% 7.00% Saraswat Co-operative Bank 5.25% 6.00% 6.50% 7.25% 7.25% 7.25% Ahmedabad Mercantile Coop Bank 5.50% 6.00% 7.00 % 7.00% 7.00% 7.00% State Bank Of India (SBI) 4.75% 5.25% 6.00% 6.00% 6.50% 6.50% ICICI Bank 5.25% 6.00% 6.25% 6.25% 7.00% 7.50%
So, the first question which comes to our mind is why should not put our money in Cooperative banks rather than nationalized or private banks. But then there is a risk factor which comes in. In India 19 cooperative banks have closed down in 2009! So, is it safe to park your valuable money in cooperative banks?
While cooperative banks were closing down, the Reserve Bank of India (RBI) tried to bring them under tighter control. Till a few years ago, Urban Commercial Banks were not strictly monitored with two regulators in the RBI and the Registrar of Cooperative Societies. But now the RBI has taken various measures to bring them under control.
It has signed MoUs with 11 states to set up task forces on UCBs to work with the registrars on remedial action and take the tough decisions on the structure. It has also put a limit of "15 per cent of the own funds of the bank" for loans to one borrower group, making it difficult for the banks to give a huge loan to one entity and compromise its stability, as was happening earlier. According to the RBI, cooperative banks are intended primarily for members and all financial information pertaining to the bank is required to be made available to them.
In addition, according to the existing regulations, a bank is required to publish its balance sheet in a newspaper in circulation in the main area of operations of the bank. They are also required to place their annual accounts before the annual general meeting. Certain minimum disclosures have been prescribed by RBI. All this information can be used by public in making investment decision.
However, the bank customer has to make his or her own choice, depending on which the bank offers the most suitable product. While the RBI is doing its bit, it says you should also run the following checks to ensure that you have a nice experience.
- Check for deposit cover. Ask the bank to what extent your deposit will be covered by DICGC insurance if you are not investing in the name of an individual but as a business organization.( In the event of a bank failure, DICGC protects bank deposits that are payable in India.)
- Scheduled banks. The 53 scheduled cooperatives banks are fairly safe. Find the list at http://rbidocs.rbi.org.in/rdocs/content/pdfs/schedulecoop.pdf.
- Size. For non-scheduled banks, there is safety in size. Decide in favor of bigger urban cooperative banks.
- Non-performing assets. These should be within single digits. The higher the NPA, the bigger the risk.
- Capital adequacy. This ratio should not be less than 9 per cent.
- Credit-deposit ratio. Ideally, the ratio should be 66 per cent. Anything more shows that the bank is not in a position to lend and, hence, get new business to pay back the depositors.
- Profits. Check whether the bank has been making profits for the last three years.
- RBI directive: Check out the current financial status of a bank operating under RBI's directive before dealing with it.
2 Responses to “Co-Operative Bank Fixed Deposits”
Jai said on July 7th, 2010 at 12:07 pm
Co-operative banks are way ahead, how to get in touch with them. Very difficult to find them.
girish said on November 18th, 2011 at 12:11 am
please advise investing in co operative urban bank in kerala is safe or not specifically ottapalam branch?