India’s cooperative banks – regardless of their geographic remit – are relative stragglers on asset quality parameters vis-à-vis entities under stricter regulatory lens, but there’s a catch. Not all of them display weaknesses that are endemic to the category. Rather, their underwriting reflects broadly the regional economies they operate in.

An analysis of recent data submitted to the Rajya Sabha indicates that most states that have gross non-performing assets (NPA) ratio of less than one percent are those that are also economically advanced. By contrast, NPAs are high for cooperative banks operating in economically backward states.


The finance ministry told the Upper House that 7 state cooperative banks, 424 Urban Cooperative Banks (UCBs) and 120 District Central Cooperative Banks (DCCBs) have gross NPAs higher than 10%, the ministry having collated the data from their respective regulators - the Reserve Bank of India (RBI) and the National Bank for Agriculture and Rural Development( Nabard).

An analyis in the Reserve Bank’s latest Financial Stability Report indicates that the GNPA ratio and NNPA ratio of UCBs decreased in March 2024 from September 2023 and March 2023 ratios, except for a marginal uptick in non scheduled urban cooperative banks. Trend in provisioning coverage ratio (PCR) also shows improvement post-pandemic, with PCR increasing from both March 2023 and September 2023 levels. GNPA ratio of large borrowers, which accounted for 24 per cent of UCBs’ loan book, followed similar trend . The improvement in asset quality in March 2024 was witnessed across all tiers except the smallest one (Tier 1)

The RBI, which regulates urban cooperative banks, and Nabard, which does the same office for the rural lenders, have implemented several measures lately to improve the financial health of the cooperative sector. The measures appear to be bearing fruit: While as a category, these lenders have a higher proportion of NPAs than normal commercial lenders, the share of bad assets has been reducing steadily over the years.