Plea to extend deadline to get co-op bank permit

The Maharashtra government has appealed to the finance ministry to extend the March deadline for seeking banking licence by the Maharashtra State Cooperative Bank (MSCB).

The government, which has dissolved the board of directors of MSCB and appointed administrators in May last year, has told the finance ministry it will not be possible for the bank to meet the targets set by RBI and National Bank for Agriculture and Rural Development (Nabard) for achieving at least 4 per cent of capital to risk assets ratio (CRAR) required to get the banking licence.

The March deadline was for all cooperative banks without banking licencee. It was based on the recommendations made by a committee headed by RBI’s former deputy governor Rakesh Mohan.

Apart from MSCB, there are six state cooperative banks from north-east India and 134 district central cooperative banks (DCCBs), including 11 from Maharashtra, that want extension.

Chief Minister Prithviraj Chavan told reporters at the sidelines of state credit seminar organised by Nabard that he has already asked the finance ministry for extension. “It will not be possible for MSCB to meet all targets, especially with regard to CRAR, to seek the banking licence and therefore a formal request has been made to advise RBI to consider the time limit prescribed for obtaining the licence by MSCB and 11 DCCBs so that flow of agricultural credit is not impacted in areas where these banks function,” he said.

Chavan’s statement is crucial as the severe differences have been cropped up between the MSCB’s statutory auditors Batliboi & Co and Nabard during their assessment of balance sheet for 2010-11.

While MSCB’s statutory advisors have observed the bank’s CRAR having turned positive to 5.86 per cent from -1.5 per cent. Nabard in its inspection report, however, has put the CRAR at 1.9 per cent. Nabard still insists that MSCB needs to further keep its finances on track and achieve 4 per cent CRAR.

Chavan justified the government’s decision to appoint administrators and admitted that the MSCB did violate credit norms and it was overlooked by the state government, the RBI and the Nabard. However, he said under the administrator’s rule all efforts were made to revive the bank and make its finances strong.

In his address at the state credit seminar, Chavan asked RBI and Nabard to do out-of-the-box thinking to meet the challenges for providing credit to agriculture and allied activities. The banks need to treat separately the credit requirements for dry land farming and those based on irrigation. He emphasised a need for support to cooperative sector in the state. Nabard in its presentation projected Maharashtra’s production credit requirement at Rs 27,185.61 crore for 2012-13 against Rs 23,180.66 crore in 2011-12.