The Hindu Business Line : Rural co-op banks despair of recovery

Kolkata, March 3 The recovery drive as well as disbursal of fresh loans have received a setback in rural areas following the Union Finance Minister’s Budget announcement on waiver of loans to farmers.

Inquiries reveal that the borrowers in rural areas have stopped paying their dues; worse, some of them, who made repayments a few days before the Budget announcement, are now insisting on return of their money. As a result, disbursements of fresh loans have become difficult, causing concern to banks, cooperative credit institutions and regional rural banks (RRBs) because all these will be reflected in the results for 2007-08.

The worst hit are the cooperative credit institutions covering state cooperative banks, district central cooperative banks (DCCBs) and primary credit societies whose exposure in rural credit is the maximum, followed by RRBs having the support of the sponsoring banks. The commercial banks are the least affected because their exposure to small and marginal farmers is limited.

Some of the state cooperative banks and the DCCBs, trying hard to boost recovery in the last quarter, have thrown up their hands in despair. “Last year our recovery was 85 per cent and this year we were hoping to achieve more than 90 per cent, but it is not possible now after the Finance Minister’s Budget announcement”, according to a spokesman for a cooperative credit institution.

No consultations

Mr B. Subramaniam, Managing Director of National Federation of State Cooperative Banks Ltd (NAFSCOB), the apex body of the cooperative credit institutions in the country, in a statement, observed that the proposed debt waiver scheme would vitiate the loan recovery environment in the rural areas. “The announcement has been made without any prior consultation either with the banks or cooperative credit institutions or the RRBs ; also there is no any budgetary provision to meet the burden of the waiver”, he said.

‘Bonds no help’

Mr Samir Ghosh, Chairman of West Bengal State Cooperative Bank Ltd, said 98 per cent of the crop loans advanced by the cooperative credit institutions in West Bengal were directed towards small and marginal farmers. The proposed waiver would hit the bank hard as an estimated Rs 2,500 crore might have to be waived. Neither the Vaidyanathan Committee nor the Radhakrishnan Committee favoured loan waiver as a means to mitigate the hardships of the farmers, he said.

Mr Ghosh made it clear that the issuance of SLR bonds to compensate the loss to be caused by the waiver would not be of any help to the cooperative credit institutions. “We want cash reimbursement”, he said.

More Stories on : Co-operatives | Farm credit | Budget | Non-Performing Assets

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