Cooperative societies came into force under the influence of the English Friendly Societies Act of 1886. In India, the act came into existence on March 25, 1904, to control cooperative credit societies.
The main mission of these societies was to promote farmers, make them self-sufficient, and improve their economic status. .
The cooperative societies are classified into two categories in terms of lending, i.e., Primary Agricultural Credit Cooperative Societies (PACs) and Primary Cooperative Agricultural and Rural Development Bank (PCARDB). PACs are for the short-term, i.e., less than one year, and PCARDBs are for long-term credit up to 15 years.
Both borrow from NABARD at the rate of 9 per cent per annum, and they lend to farmers at the rate of 12 per cent per annum. Of this, farmers have to pay annually 3 per cent interest on their borrowings and remaining 9 per cent is borne by the Government as subsidy. The other financial source of these banks are shareholders’ funds.
The banks provide good credit worthiness to farmers in different schemes according to their requirements but the main problem pertains to recovery.
The first reason for losses that occur in cooperative societies is from the farmers’ side because of failure of crops, drought, heavy rainfall and the fact that the Government does not provide a good market price for the crops grown by the farmers. At present what income they receive for their crops is not equal to the total cost of their expenditure. Farmers’ economic condition is not good at present and so they are migrating from agriculture. Therefore, income from agriculture to GDP is decreasing day by day.
The second reason for loss comes from the political leaders and their waiver of loans and waiver of interest rates. Although they pass this resolution easily, they are not able refund the amount in time to the cooperative institutions and this causes heavy dues in the cooperative societies.
At present, the Government is providing subsidies and all benefits to farmers but such benefits do not fulfill the requirements of farmers in an efficient manner.
If we consider farmers to be the backbone of our nation, the Government has to take necessary steps to uplift their living status by providing a good market price for their crops. This will gradually motivate farmers to increase their output and also help them repay theie loans in time to the cooperatives banks. Further, if the politicians able refund the waiver amount in time to the cooperative banks within the stipulated time, only then will the cooperative banks be able to overcome their losses.
(Manjunatha is doing his M.Com. at the Hemagangotri PG Centre, Hassan, Karnataka.)