The Hindu Business Line : `RBI must be the sole regulator for co-op banks'

THE gross misuse of cooperative funds for political ends has landed a good number of institutions in the cooperative sector in dire straits, the General Secretary of the Tamil Nadu Cooperative Bank Employees Association, Mr P. Balakrishnan, said.

Mr Balakrishnan said about 40 per cent of the cooperative banks were in the red because of political intervention in the disbursement and collection of loans. "These institutions have extended about Rs 12,000 crore of credit. But the overdues continue to mount, following announcements by the Centre and State for political mileage," he said. He cited the ban imposed by the Tamil Nadu Government on the collection of agricultural dues as a result of drought conditions in the last three years.

He added that the Centre had aggravated the situation by asking the banks to reschedule crop loans outstanding as on March 2004 for five years with a moratorium of two years. "This announcement has left thousands of primary agriculture cooperative banks in a liquidity crunch. These banks are starved of any collection from the farmers." Advances to farmers nationwide is around Rs 14,000 crore, of which the State's lending has been approximated at over Rs 700 crore.

Stating that the Centre was fully aware that refianced funding from Nabard was only 23 per cent of the loans disbursed by cooperative banks, he said that the banks are walking a tight rope by deploying the balance from the deposits collected from the public.

Condemning the politicisation of rural credit and the dual control of cooperative banks, Mr Balakrishnan said, "The federation, under the circumstances, feels that the Reserve Bank of India alone should act as a regulator for determining the cooperative banks' activities and financial dealings."

He pitched for the re-capitalisation of the cooperative sector to strengthen its position in the extension of rural and agricultural credit.

"The disturbing trend is in the non-reduction of interest rates for agricultural credit by Nabard and RBI. The RBI continues to charge 6 to 7 per cent per cent for its refinance," he said.

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`RBI must be the sole regulator for co-op banks'