The Hindu Business Line : Agri co-op banks oppose Vaidyanathan panel terms

STATE-LEVEL and primary cooperative agriculture and rural development banks (SCARDBs/PCARDBs) have decided not to associate with the Vaidyanathan Task Force reviewing long-term lending for agriculture and rural development.

Speaking to Business Line, Mr K. Sivadasan Nair, Chairman of the Mumbai-based National Cooperative Agriculture and Rural Development Banks' Federation Ltd, said this is in protest against the terms of reference that are inimical to the interests of the cooperatives.

"We have reason to believe that the amended terms of reference is a veiled attempt to formalise a thinking in certain quarters to wind up the long-term credit structure and suitably manipulate the system to ensure free play for only commercial banks and regional rural banks (RRBs)," he said.

This move is highly objectionable. ARDBs (Agriculture and Rural Development Banks) continue to play an important role in rural capital formation in spite of their weaknesses, which can at best be attributed to the faulty policies of the Central and State governments, Reserve Bank of India and National Bank for Agriculture and Rural Development (Nabard). ARDBs serve 105 lakh rural families mostly in the category of small and marginal farmers who are unable to access credit from anywhere else.

Strengthening of these institutions is also required for the management and recovery of loans of about Rs 18,000 crore disbursed out of refinance from Nabard against State Government guarantee.

Instead of suggesting a revival package for these institutions, the task force is assigned merely to "examine their relevance and the role they can play in the comprehensive strategy for investment credit to farmers."

The terms of reference do not mention anything about the revival of ARDBs, including their recapitalisation.

It is worth recalling in this context the fact that a Reserve Bank-appointed committee had even recommended full-fledged banking status to the SCARDBs, which, for some reason, has been put on the backburner.

ARDBs constitute an important segment of the cooperative rural credit structure accounting for about 40 per cent of the combined agricultural loans outstanding under both the long-term and short-tem streams of the cooperative credit system.

The federation, the SCARDBs and a number of State governments have voiced their concern to the Centre over the terms of reference.

They will refrain from associating with the task force in any manner, including providing information or otherwise interacting, till the terms of reference are modified, Mr Nair said.

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Agri co-op banks oppose Vaidyanathan panel terms