The Hindu Business Line : Call to revitalise agri co-op banks

WHILE avowing to improve the health of the cooperative banks in the State, the Tamil Nadu Cooperative Bank Employees' Association (TNCBEA) has alleged that the interference of the Government in the functioning of these banks had put them in a tight spot.

The association is gearing up to launch a series of campaign to press its demand, which, among others, include implementation of the recommendations of the Task Force headed by Prof A. Vaidyanathan and the need for bringing these banks under the ultimate control of the Reserve Bank of India. It has also suggested measures for revitalising the sagging Primary Agricultural Cooperative Banks (PACBs) in the State.

Of the 4,454 PACBs in the State, 1,644 have been identified as viable, while 1,848 have been declared potentially viable and the rest unviable

Mr P. Balakrishnan, General Secretary, TNCBEA, told Business Line that 18 PACBs had closed shop in the last 12 months and the total accumulated loss had mounted to over Rs 900 crore.

Viability hit: "The State Government's directive on non-collection of dues from farmers (citing drought situation) has affected the viability of these banks to a large extent. It took a turn for the worse when the Union Finance Minister, Mr P. Chidambaram, unilaterally declared the conversion of crop loan over dues as on March 31, 2004 as rescheduled loans for five years with a moratorium of two years. There is no money for rotation/recycling, as these banks could not collect the dues," he said.

The TNCBEA has demanded that the rescheduled amount of Rs 2,598 crore (as on March 2004) be waived and the waiver amount borne by the Centre, as the State Government had already declared an assistance of Rs 647 crore for waiver of interest (on the interest outstanding as on March 2004 and the interest to be accrued between March 2004 and June 2006).

The interest cap (declared by the State Government) on agricultural lending has further deteriorated the health of the PACBs. Subsequent to the announcement of the 9 per cent cap on lending, these banks had to go for interest margin of 2 per cent. "This has not been sufficient for meeting the PACBs administrative expenses," he said.

Farm loan dues: "The Government of Tamil Nadu should immediately withdraw the orders of ban issued for collection of agricultural dues. It should give a three per cent interest subsidy on farm loan so that the borrower gets the credit at 7 per cent and the PACBs would have the 3 per cent interest margin," he said and added that the RBI should also reduce its rate of refinance for farm credit at 3 per cent below bank rate.

The TNCBEA has demanded that the Registrar of Cooperative Societies issue sufficient orders permitting all PACBs to accept deposits from the public. "Necessary safeguards can be ensured for proper utilisation of funds in the interest of the bank and the deposits," he added.

The association has demanded re-capitalisation assistance to all PACBs, waiving the conditionality stipulated by the Task Force. It may be recalled that the Vaidhyanathan Committee had recommended granting of Rs 15,000 crore for re-capitalisation of cooperative banks, which had been accepted by the Centre in principle.

One of the stipulations prescribed by the Task Force for providing assistance to the PACBs was that the collections should have been a least 50 per cent of the outstanding to become eligible for re-capitalisation. "This condition would affect a majority of the PACBs adversely. We are asking that the 50 per cent prescription be done away with and the re-capitalisation assistance be extended even to loss-making PACBs," Mr Balakrishnan explained.

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