Suggestions on the National Cooperative Policy made by a panel set up headed by former Union Minister Suresh Prabhu may have emphasised the importance of the cooperative sector.

But, it appears to ignore the premier role and contribution of the National Bank for Agricultural and Rural Development (Nabard), according to the All-India Nabard Employees Association (AINBEA). 

Reported proposals also aim at further centralisation of a sector that essentially falls under the State list of the constitution, Rana Mitra, General Secretary, AINBEA, said.

Suggestion to form a National Cooperative Bank bypassing Nabard, which has been playing a crucial role since 1982 to strengthen cooperatives as mandated by the RBI is not a prudent one, Mitra told businessline. 

Expertise and experience

“In fact, Nabard should be given the responsibility to supervise the entire cooperative sector, including primary agricultural credit societies (PACS) and other types, similar to the role assigned to the RBI vis-a-vis commercial banks. Nabard has required expertise and experience as proved in the successful implementation of the SHG Bank linkage programme despite a few shortcomings.” 

Nabard also successfully conceived and implemented the Vaidyanathan Committee recommendations for the turnaround of the short-term agri-finance cooperative sector. Proposals for fund support from the Centre for the long-term have been languishing for a long, Mitra added.

A portion of the CRR and SLR of the rural branches of commercial banks, RRBs and cooperative banks may be transferred to Nabard’s development fund. This can be channelled to strengthen its development banking at a low-cost. 

Large borrower of funds 

The neoliberal economic policies from the early 1990s have forced Nabard to mobilise funds from the market and now it is one of the largest borrowers from the money market.

Own funds in end-March, 2022, constitute only 10 per cent of the total balance sheet size of ₹7,57,472 crore, Mitra pointed out. The rest is borrowed resources, which have a significant bearing on cost of funds. 

The resultant hike in interest rates for farmers, the cooperative sector, and rural development could have been easily mitigated had RBI not transferred almost its entire yearly surplus to the Centre.

“Some of these funds could have been channelled into Nabard’s National Rural Credit Funds to cater to the long-term low-cost investment needs through cooperatives and RRBs. Failure to do so violates relevant provisions of the Nabard and RBI Acts. AINBEA has been quite vocal on this count for more than three decades now,” Mitra said.

Maintain apex status

The National Cooperative Policy has also suggested the formation of another Development Financial Institution to finance the proposed National Cooperative Bank, Mitra pointed out.

“The AINBEA opposes this and requests the Centre to channel all funds to the cooperative system through Nabard only. Downgrading its apex status is in violation of the spirit of the RBI-appointed Committee to Review the Arrangements for Institutional Credit for Agriculture and Rural Development (Craficard).”

The Craficard had strongly opined that Nabard is nothing but an extended arm of RBI.

“Development banking in India has a unique history of getting borne, nurtured, and strengthened out of the womb of the Central Bank, which has few parallels in the world. The AINBEA has been demanding the strengthening of the basic mandate and DFI character of Nabard with low-cost fund flow from the Centre and the RBI. It may be forced to take out a march to Parliament, declare a strike, and other campaign programmes to save Nabard and the notion of development banking,” Mitra added.