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Vinson Kurian

Thiruvananthapuram , April 10

DELAY in restructuring and revitalising the long-term lending co-operatives is threatening to create a `cooperative debt trap' in the State with little elbowroom for the players - institutions, re-financiers and farmers - to manoeuvre.

All eyes are now focussed on the proceedings of the Vaidyanathan Committee that was originally mandated to examine issues pertaining to the short-term credit institutions but is now expected to look at the long-term credit structure after pressure was brought to bear on it by concerned players. Mr A. V. Narayanaswami, a leading agri-business consultant based here, is of the opinion that immediate attention must be paid to restructuring and recapitalising the long-term lending co-operatives.

For instance, the apex Kerala State Cooperative Agricultural and Rural Development Bank has under its tutelage 44 Primary Cooperative Agricultural and Rural Development Banks.

Assuming an average membership of 10,000 at the branch level, this would conservatively provide for a client base of 4.4 lakh farmers who own near contiguous areas of small land holdings. Most of these lands are found to grow traditional plantation crops that are long gestational in nature and therefore in need of development finance of a longer tenure.

The plight of farmers who have availed finance from CARD banks by offering their entire holdings as collateral is largely being ignored, says Mr Narayanaswami. They have no access to modern personal banking services offered by the new generation banks and are instead forced to depend on moneylenders even for marginal sums.

Added to this is the lack of an institutional mechanism that would mitigate the distress brought on to them by the vagaries of the market. The State has been specifically hit by the fall in commodity prices in the wake of opening up of the national markets. So efforts must be initiated forthwith to stabilise the KSCARD and PCARD banks by identifying the members therein as potential target groups.

"For the reforms to succeed, issues such as replanting, diversification and agro-processing must be sorted out by treating these farmers as a critical mass. Immediate decisions would have to be made on measures such as debt mitigation and the long-pending demand for declaring universal banking facility to CARD banks," Mr Narayanaswami said.

What should not be forgotten is that capital adequacy, supervision and regulation as prescribed by the Basel II norms would become applicable to all banks sooner than later. Long-term credit institutions will also be expected to play ball, with the `Reforms first, Money later' norms applying to them just as the short-term credit institutions.

The onus of pushing the reforms will fall squarely on the State Government as both `agriculture' and `cooperation' happen to be State subjects as provided for by Constitution of India.

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