NCUI demands withdrawal of NABARD circular on PACs

On July 22, NABARD issued a circular directing DCCBs, STCBs to convert PACs as their business correspondents by taking over their asset and liabilities

National Cooperative Union of India today demanded that NABARD withdraw its recent circular that debars Primary Agricultural Cooperative Societies (PACs) from handling all lending related activities directly.

A resolution in this regard was moved at a national workshop organised by National Cooperative Union of India (NCUI) to discuss the impact of NABARD circular on short-term credit to farmers.

On July 22, National Bank for Agriculture and Rural Development (NABARD) had issued a circular directing District Central Cooperative Banks (DCCBs) and State Cooperative Banks (STCBs) to convert PACs as their business correspondents by taking over their asset and liabilities and stopping PACs from accepting deposits and lending.

Stating that NABARD's move has potential to end the very existence of democratic structure cooperative in the country, NCUI President Chandrapal Singh said, "The circular should be withdrawn immediately. PACs may function as business correspondents for DCCBs and STCBs but they should be allowed to continue with their existing function."

The circular has been issued based on the recommendations of an expert committee set up by the RBI. But most members of the said committee were against dismantling PACs role in lending activities, he said.

The cooperative is a state subject and the circular encroaches the right of the state governments, he added.

Speaking at the workshop, National Federation of State Cooperative Banks Ltd (NFSCOB) Managing Director D Subramanyam sought to know if NABARd has right to issue such a circular and whether DCCBs and STCBs can execute such directives.

He sought urgent withdrawal of the circular and proposed consulation with the stakeholders particularly with state governments.

Bishupad Sethi, Commissioner-cum Secretary to Odisha Cooperative Department said, "We got circular recently. We have solicited comments from DCCBs. We are yet to take decision. We find that there are certain inconvenience."

Such a move will have implication on PACs, he added.

At present, there are about 92,432 PACs in the country and 72% of them are viable. About 49% of PACs are running in profits and 39.35% of them are making losses, according to the NFSCOB.