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Vinson Kurian

Thiruvananthapuram , April 27

THE cooperative Agriculture and Rural Development Banks (ARDBs) in the State have demanded operational autonomy that would enable them emerge as a `one-stop' destination for all types of rural credit requirements.

In a presentation made before the Vaidyanathan Task Force for Long Term Credit Structure, the apex Kerala State Cooperative Agriculture and Rural Development Bank (KSCARDB) said autonomy in operations would help enlarge the role of functions of these banks as also the range of services on offer.

The banks have been playing a `major role' in the socio-economic transformation of rural Kerala and actively implementing Government-sponsored programmes.

However, severe resource constraints have not allowed them the freedom to cater to the entire credit needs of the rural folk. This issue could be dealt with satisfactorily if operational autonomy were granted.

The cooperative ARDBs are the pioneers in providing long-term credit and have come to enjoy a major share in the long-term credit market. Being specialised agencies in retailing rural investment credit and cooperative in structure with abiding farmer loyalty to boot, there is a strong case for their continued existence.

However, many of the areas the cooperatives purvey are subject to duality, at times plurality, of control by the State Government, the Registrar of Cooperatives and the National Bank for Agriculture and Rural Development (Nabard). The resultant overlap in jurisdiction not only makes the task of regulation and supervision difficult but also poses problems for the banks in discharging their day-to-day functions.

A clear demarcation of the role and jurisdiction of these agencies is necessary for bringing about effective supervision of cooperative ARDBs and adequately prepare them to compete with other financial institutions regulated mainly by the Reserve Bank.

Mounting losses have reduced the capital of some of the ARDBs to perilously low levels. Various reasons could be ascribed for the losses, but none more significant than the quantitative restrictions imposed on shares an individual member is allowed to hold. The emerging situation calls on the State and Central Governments to initiate immediate efforts for recapitalising these banks.

Another proposal made by the KSCARDB is that the existing system of floating of debentures be replaced with a loan system.

Debenture flotation has proved to be a cumbersome procedure resulting in avoidable waste of manpower and stationery.

It has also been found that while redeeming the debentures, subscribers seldom return the relative scrips. Proper upkeep of these scrips, both `matured' and `live,' has since proved a major area of concern.

Hence, it is requested that Nabard consider, on an experimental basis, a switchover to the loan system with respect to KSCARDB.

It also proposed that Nabard consider extending refinance without insisting a Government guarantee. This is because this pre-condition has been found to inflate the cost of funds largely because of the guarantee commission payable at the rate of 0.75 per cent.

The fact that a ceiling on Government guarantee has come to be enacted in recent times will make it impossible for the bank to obtain additional guarantee for future flotations.

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Kerala agri rural banks seek operational autonomy

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