Many urban co-operative banks are reeling under huge losses. Even after making huge provisions, the accumulated losses of 55 scheduled UCBs have shot up to Rs 1,598 crore for the year 2005-06 from Rs 468 crore in 2004-05, a steep rise of 241 per cent.

As per Reserve Bank of India figures, as many as seven UCBs made losses totalling Rs 154 crore in 2004-05 and Rs 118 crore last year.

The rise in overall losses comes at a time when these banks reported a fall in gross non-performing assets from Rs 6,193 crore from Rs 5,053 crore.

“The industry had certainly lost consumer’s confidence due to failures of many banks in the last 2-3 years but things are now looking better,” says Manjayya Shetty, CEO of Abhyudaya Co-op Bank Ltd, a Mumbai-based bank with a customer base of eight lakh.

Last year, 10 scheduled UCBs were placed under restructuring plan while RBI allowed 17 weak banks to merge with a stronger partner. The sector is witnessing a crisis of confidence with the Reserve Bank of India tightening investment norms while the state governments were delaying steps which could regulate the sector in a better way.

Rampant corruption while lending, dual regulations by the RBI and state governments, high interest rates to entice depositors and the resultant bad debt are some of the problems now plaguing the sector.

With the government now planning a massive booster shot of Rs 14,839 crore — enough to build 3 world class airports — for the co-operative banking sector at the taxpayer’s expense, analysts say time has now come to regulate the industry properly by inculcating internationally best practices on banking.

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