The Hindu Business Line : Fiscal support for RRBs, co-ops urgent: Reddy

THE Reserve Bank of India Governor, Dr Y. V. Reddy, has strongly favoured a comprehensive overhauling of rural cooperative structure and the regional rural banks (RRBs) which act as critical instruments for rural credit.

Expressing serious concerns over non-performing loans and erosion of deposits in both cooperatives and RRBs, he favoured their early restructuring and recapitalisation.

Dr Reddy was addressing the two-day international seminar on `India's Economic and Social Development: National and International Perspective' at the Administrative Staff College of India (ASCI) here on Tuesday, which was organised in the honour of renowned economist, Professor C.H. Hanumantha Rao. The key concerns Dr Reddy expressed included inadequacy in credit supply, constraints on timely availability, high cost, neglect of small and marginal farmers, low credit-deposit ratios in several States and continued presence of informal markets.

While immediate measures were undertaken to increase the flow of credit to agriculture, there was a need to review the policy of rural credit in a comprehensive and thorough manner, he said.

On the agenda for future, the RBI Governor said there was a need for legal and institutional changes relating to governance, regulation and functioning of rural cooperative structure and RRBs.

Stating that these changes warranted in cooperatives and RRBs involved the deep commitment of State Governments and would have a significant bearing on political economy, he said the current thrust to improve credit delivery might soon face limits unless the legal and institutional changes were agreed and acted upon in good faith and in a timely fashion.

Justifying the recapitalisation of cooperatives and RRBs, he said such a one-time fiscal support was urgent and essential for several reasons. According to Dr Reddy, delayed response to the problem could even end up being more expensive.

Further, the current acceleration of credit-delivery could be sustained in the medium term only if such fiscal support from States and the Centre was firmly put in place soon to revive or reorganise the rural cooperative structure and RRBs.

On the current strategy of RBI to increase the flow of rural credit, Dr Reddy said rural credit was extended to include facilities such as storage as well as credit through NBFCs.

Further, the RBI Governor said public and private sector banks were being encouraged to enhance credit-delivery while strengthening disincentives for shortfall in priority sector lending.

More Stories on : Regional Rural Banks | Co-operatives

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Fiscal support for RRBs, co-ops urgent: Reddy

Dollar fall overdone?

Rupee, gilts fail to hold gains

`New farm insurance norms needed'

CheckFree logs in Satyam as preferred partner

Moscow bank picks Flexcube

Andhra Bank `well insulated' against investment swings

ICICI Bank hikes deposit, lending rates

Govt looking at merger of PSU general insurance cos

Finance Ministry to encourage mergers

Union Bank move for reforms draws TU ire