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Co-op credit: ‘Implement Vaidyanathan report early’

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Thiruvananthapuram, Oct. 6 The National Co-operative Agriculture and Rural Development Banks Federation has sought early implementation of the Vaidyanathan Task Force recommendations for revival of long-term cooperative credit structure.

The task force, in its report submitted in August 2006, had recommended a financial package covering accumulated losses and technical assistance for reviving co-operative agriculture and rural development banks. The total outlay of the package was pegged at Rs 4,839 crore.

The Centre had earlier asked for the views of the state governments on the report, and it has now decided to convene a meeting of the representatives of the states on October 10 to consider the revival package for the co-operative institutions. In this context, the federation has sought the support of the state governments to facilitate the early implementation of the revival package.

Recommendations

Referring to the recommendations of the task force, the Chairman of the national federation, Mr K. Sivadasan Nair, said here on Friday that institutions having overall recovery of more than 30 per cent should be considered for revival instead of more than 50 per cent recovery as suggested in the report.

Also, institutions having less than 30 per cent recovery should be given two years’ time to reach the cut-off level of 30 per cent and become eligible for the revival package instead of liquidating them at the beginning of the reform process.

Licensing ARDBs

Mr Nair said that the task force had recommended to the Reserve Bank to consider licensing agriculture and rural development banks (ARDBs) by bringing them under the purview of the Banking Regulation Act, 1949, on merit. However, the RBI has not so far prescribed any separate norms for licensing ARDBs and it needs to evolve norms for giving banking licence to ARDBs.

He said that conversion of branches of unitary state co-operative agriculture and rural development banks (SCARDBs) into primary ARDBs should not be insisted upon as pre-condition for revival support. It should be left to the discretion of the institutions and the state governments concerned.

Mr Nair pointed out that the task force had recommended that the National Bank for Agriculture and Rural Development (Nabard) Act should be amended to allow Nabard to provide refinance to primary ARDBs, either directly or indirectly, through financial institutions other than SCARDBs.

However, the task force has not cited any reason or advantage for adopting such a method. Provision for financing primary ARDBs through upper tiers other than the state-level institutions is unacceptable, as it would result in destabilising the federal set-up of ARDBs.

Also to be opposed is the recommendation that primary ARDBs should be given the freedom to affiliate or de-affiliate themselves with an upper tier of their choice. If the intention of the task force was to facilitate the primary banks to borrow from other agencies also, it was possible without de-affiliation with their own structure, Mr Nair said.

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