The Hindu Business Line : `Allow apex-level entities wider access to public funds' — Panel report on long-term coop credit structure

A TASK Force to suggest revamp of long-term cooperative credit structure has recommended that apex level entities in such structures be allowed much wider access to public funds.

In its draft report, submitted to the Union Finance Minister, Mr P. Chidambaram, on Thursday, the Vaidyanathan Panel has said that apex entities such as the State Cooperative and Agriculture Rural Development Banks (SCARDBs) be enabled to access public deposits and debt instruments on the pattern of Non-Banking Finance Companies. (Even at the primary level, the Task Force has suggested that the Primary Agricultural and Rural Development Banks be enabled to mobilise member deposits and also borrow from any financial institution.

Briefing newspersons on Friday on the recommendations contained in the draft report, Prof A. Vaidyanathan, who is the Chairman of the Task Force, said the panel is of the view that the revival of long-term credit structure is a "worthwhile" effort.

Financial package: The Task Force has now proposed a financial assistance package worth Rs 4,839 crore (including contingency of Rs 1,500 crore) for removing the financial impairment in the credit structure.

"The amount suggested for financial package is totally indicative," said Mr Y.S.P. Thorat, Managing Director, National Bank for Agriculture and Rural Development and Member Secretary of the Task Force.

Linkage mooted: Prof Vaidyanathan said the panel has also recommended that there be a linkage between the short-term and the long-term credit structures.

"Just as we suggested in our report on short-term cooperative credit structures that banks instead of lending only short-term should also be allowed to lend long-term, we think there is a case for long-term structure to combine long-term and short-term lending", he said.

System's functioning:The draft report has also made a case for allowing greater freedom to SCARDBs in the composition of the portfolios. The long-term cooperative credit structure has a portfolio of over Rs 16,000 crore. The system has, however, been making losses in general and its accumulated losses across States aggregate Rs 2,000 crore.

Currently, the long-term cooperative credit structure provides only long-term investment loans for agriculture, non-farm sector and housing to the rural population. This structure operates in 20 States. It is a non-fund based system that operates mainly on borrowed funds.

It is also federal in character in 10 States with primary cooperatives affiliated to a state-level bank. In eight States, it is unitary in character with the state-level bank having its own branches as the retail outlets and in another two States it has a hybrid character.

Overall, the system has about 2,500 retail outlets serving 1.56 crore members and now disbursing about Rs 3,200 crore annually for investments such as irrigation, mechanisation, farm animals, rural industries and housing.