The financial crisis faced by the Kerala Transport Development Finance Corporation (KTDFC) is not due to any irrational or uneconomic activities undertaken by the Corporation, mismanagement or fraud, but on account of loans taken from the Ernakulum and Palakkad District Cooperative Banks on the State Government’s directive, to restructure KSRTC’s loans, according to an affidavit filed by B. Ashok, Chairman and Managing Director of KTDFC, before the Kerala High Court

The affidavit by the government-owned NBFC, said as a result of the non-repayment of the KSRTC loan and the simultaneous regulatory stoppage of further deposit-taking activities by the RBI, KTDFC’s outstanding term deposits could not be repaid from its meagre other incomes, which were barely sufficient to maintain its rented real estate properties and to pay staff salaries.

The affidavit was filed in response to a Kolkata-based company, Lakshminath Tradelink Pvt Ltd, seeking a directive to KTDFC to immediately release its four matured fixed deposits.

In fact, the lending of loans through consortium to KSRTC has upset KTDFC’s otherwise profitable deposits /lending business. Absorbing the cost of restructuring KSRTC’s debts had jeopardised KTDFC’s deposit operations, which led to RBI imposing restriction on the corporation’s day-to-day business due to negative Net Owned Funds (NOF) .

In line with the RBI’s advice, the corporation had stopped NBFI (Non-Banking Financial Institution) activities. The deposit taking activity, which used to garner an average Rs 150 crore business per annum, had come to a standstill with effect from August 3, 2022. The RBI issued the order due to the mounting NPAs created by the KSRTC, KTDFC’s main debtor.

As on August 31, 2023, KTDFC’s total outstanding loans, together with interest, comes to Rs 9l2 crore, which includes a short-term loan taken from the Palakkad and Ernakulam District Cooperative Bank to clear KSRTC’s liability, the company said.

The company’s financial stability was adversely affected by the non-repayment of significant borrowing effected on March 27, 2018, i.e., from the date of participation by KTDFC in the consortium arrangement declared by the government for the revival of KSRTC.

In the financial year 2021-22, KSRTC had earmarked Rs 350 crore to be released to the KTDFC to clear the loans taken from Palakkad and Ernakulam District Co-Operative Banks (Now Kerala Bank). However, no amount was released by the KSRTC as yet.

The affidavit further said steps are being taken to recover the amount from KTDFC’s debtors, including KSRTC. If the KSRTC or the government released the amount due to KTDFC, it would be able to maintain its Net Owned Funds (NOF) and restrictions imposed on its non-banking financial activities would be lifted.

The Managing Director also said the government had released Rs 55.6 crore for repayment of depositors. The company expects that the government would release the entire amount due to KTDFC for repayment of the matured deposits shortly, as well as to clear the dues towards the loan availed for the restructuring KSRTC loans and for arranging a consortium loan to KSRTC.