Co-op banking needs revamp, despite rising credit flow, says Nabard

The state-run National Bank for Agriculture & Rural Development (Nabard) has sounded an alarm over the state of the cooperative banking sector largely due to lack of professionalism and non-adherence to banking norms. This is despite a rise in agricultural credit flow from these banks.

Nabard fears that as many as 60 banks — 56 district central cooperative banks (DCCBs) and four state cooperative banks (SCBs) — may not get their licence renewed by March. Unless RBI extends the period, the deadline for some of the cooperative banks would actually end in March 2012.

A Nabard official, who did not want to be identified, told Business Standard: "Out of 56 DCCBs, the biggest problem is in Uttar Pradesh, with 23 DCCBs being non-compliant with Section 11 (for maintaining minimum paid-up capital and reserves), covering eastern UP. This is where agriculture productivity needs to increase, but these are unlikely to get a licence by March 2012, resulting in half of UP not getting any agricultural credit from the cooperative sector. There are 10 DCCBs in Maharashtra, seven in MP, four in Jharkhand and a couple of SCBs also not meeting the deadline. We have to find alternatives, at least in eastern UP, immediately."

Adding: “Nabard is in the midst of preparing a road map to see if some of these banks can get the licence. The objective is that farmers must get agricultural credit. Nabard is exploring options, including increase in refinance and use of Rural Infrastructure Development Fund money.”

Credit flow up
In a recent presentation to the finance minister, Nabard said banks had as on August 31 disbursed close to Rs 2 lakh crore out of the target of Rs 4.75 lakh crore set by the finance minister in the year’s budget speech. Commercial banks had disbursed Rs 1.24 lakh crore of their target of Rs 3.55 lakh crore, or 34.9 per centof the target; it was 40 per cent of the target last year for the same period. While cooperatives had disbursed Rs 44,000 crore of their target of Rs 69,500 crore, which is 63 per cent of the annual target, compared to Rs 27,000 crore disbursed by them by this time last year, or 49 per cent of the target. It is Rs 17,000 crore more. In other words, during the kharif season, the cooperatives had already used up most of the credit they were expected to disburse for the whole year, with rabi still on.

As for regional rural banks, against the target of Rs 50,500 crore, they disbursed Rs. 23,000 crore or 46 per cent, compared to 43 per cent last year. "So, in absolute terms, cooperatives and RRBs have provided a significantly large amount of credit. The banking system as an aggregate (all commercial banks, cooperatives and RRBs) had provided credit as on August 31 to 27.2 million accounts, compared to 20.9 million accounts (for the same period) last year. Commercial banks did so from 8.6 million accounts last year to 9.3 mn. Cooperatives have done remarkably well in this field. Last year, they had financed by this time 9.3 mn farmers; this time they have already financed 14.28 mn farmers,” Nabard said.