KTDFC, the Kerala Transport Development Finance Corporation, had secured a fixed investment of Rs 130 crore from the Kolkata-based Sri Ramakrishna Mission. However, despite the maturity deadline passing, KTDFC has been unable to repay the amount, as per reports. In response to this, the Reserve Bank of India (RBI) has conveyed its intention to revoke KTDFC’s non-banking license. This is communicated to the Kerala state government through a special envoy.
The RBI’s decision will cast a shadow over Kerala Bank too, given its substantial investments in KTDFC. This latest setback adds to the ongoing challenges faced by cooperative banks, which initially surfaced with the troubles at Karuvannur Bank in Thrissur. Additionally, the state finance department’s inability to ensure timely repayments has played a role in the punitive measures taken.
KTDFC’s deposits are backed by a state government guarantee, stipulating that if the corporation cannot fulfill its repayment obligations, the Kerala government is obligated to step in and cover the deposits. However, given KTDFC’s current inability to honor its commitments, the credibility of this state government guarantee has also been seriously undermined.
Kolkata headquartered #RamakrishnaMission has been unable to recover the fixed deposit of ₹130 crores plus interest, deposited with Kerala Transport Development Finance Corporation Ltd (KTDFC).
— Suresh Kochattil (@kochattil) September 27, 2023
KTDFC is a Non Banking Financial Company fully owned by the Government of Kerala… pic.twitter.com/XGhrumdCyu
At the behest of the former Finance Minister, Thomas Isaac, Kerala Bank extended an unsecured loan of Rs 356 crore to KTDFC. Unfortunately, this loan subsequently deteriorated into a non-performing asset, and as a result, the outstanding amount, including interest, has now surged to a staggering Rs 900 crore. As KTDFC’s financial condition worsened, the RBI imposed restrictions preventing the corporation from accepting deposits.
Many have speculated that it is unlikely that the state government in Kerala will step up to pay KTDFC’s depositors because the Pinarayi Vijayan government itself is heavily in debt. It is currently seeking loans to even pay salaries and pensions.
KTDFC is currently in debt to its investors, with approximately Rs 490 crore held in fixed deposits that have matured. This issue came to the RBI’s attention when numerous investors, including Sri Ramakrishna Mission, voiced their concerns about KTDFC’s ongoing crisis. Consequently, the Reserve Bank issued a directive, instructing KTDFC to settle these deposits by April 2023.
On the other hand, officials at KTDFC contend that the prevailing predicament stems from KSRTC’s (Kerala State Road Transport Corporation) inability to repay a loan of Rs 360 crore, which has since ballooned to Rs 900 crore, inclusive of accrued interest. KTDFC has also pressed the state government for the reimbursement of this sum. Despite numerous deliberations, the state Finance Department has yet to allocate the requested funds to KTDFC.
