The Hindu Business Line : Nabard plea to States on rural co-op banks

THE National Bank for Agriculture and Rural Development (Nabard) has called upon State Governments to adopt the recommendations of the Vaidyanathan Committee to improve the health of rural cooperative banks.

"We need to address the problems of agriculture and rural cooperative banks. While it is fine to say that they need to step up loan disbursements, we are aware that they face a cash crunch. In this regard, we have been trying to convince States to accept the recommendations of the Vaidyanathan Committee," the Nabard Chairperson, Ms Ranjana Kumar, said here.

In its first report on revamping rural cooperative credit system, the Vaidyanathan Committee had suggested that financial aid be provided to the agriculture cooperative banking system with State Governments promising to stick to stricter norms. The cooperative banks continue to be the laggards in the targets for doubling agriculture credit in three years, Ms Kumar said.

While public sector commercial banks and regional rural banks had shown a 30 and 50 per cent increase in disbursements respectively in the first year of the programme, cooperative banks were still lagging at just 14 per cent. Pointing out that the share of cooperative banks in farm credit had declined from 60 per cent in 1992 to 27 per cent, she said that the cooperative banks should be "energised" as their local knowledge and understanding makes them the most effective vehicle of delivery of agriculture credit.

The gross non-performing asset (NPA) levels of cooperative banks have shown an alarming increase in recent years, rising from 18.8 per cent in 1999-2000 to 26.6 per cent in 2003-04.

On its own, Nabard is trying to provide cheaper refinance to the cooperative banks with a special package announced earlier this year. "For the first time, we took a subvention of 1.5 per cent from the Central Government to provide refinance to cooperative banks at 5 per cent. We have also extended another line of credit through a scheme for the farmers in distress," Ms Kumar said.

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