The Hindu Business Line : `Closure of low-recovery co-op banks harsh'

THE National Federation of State Cooperative Agriculture and Rural Development Banks has welcomed the revival package for cooperative long-term (LT) credit structure proposed by the Prof Vaidyanathan Task Force.

The task force had earlier come out with a report on the short-term (ST) credit structure, which has already been taken up for implementation. The draft report on the long-term credit structure is now put up for public scrutiny and comments.

According to Mr K. Sivadasan Nair, Chairman of the federation, the report has addressed all fundamental issues in the LT credit structure with `remarkable diligence' and has mooted the best possible solutions under the circumstances.

But the proposal for closure of units `expected not to be viable even after recapitalisation' stood like a sore thumb.

According to Mr Nair, the proposal for benchmarking the viability of institutions against their present recovery position was unfair since recovery procedures have invariably been impaired by a host of external factors including Governmental interference. The federation suggested that a lower level of current recoveries be fixed for deciding the eligibility for revitalisation. As for others, a two-year timeframe may be allowed if only to strengthen recoveries and financials. Liquidating them at the beginning of the reform process itself is best avoided.

The federation welcomed all other major recommendations, including that favouring adoption of the federal set-up in all Sstates.