Co-ops to get preference in debt waiver

The cooperative banks across the country are facing an acute fund shortage due to the surge in kharif loan demands from fresh eligible borrowers in the wake of the debt waiver scheme, said an official associated with the development. The Centre therefore issued a directive to the statutory audit departments to complete the audits of state cooperatives as soon as possible.

"State cooperatives would require the money at the earliest since their deposit base is not as strong as the rural banks. The finance ministry has indicated an August dateline for initiating the reimbursement process and clearly stated that the first preference would be given to cooperatives," said P Mohanaiah.

Simultaneously, the West Bengal government has directed the statutory audit departments to complete the waiver audit before the regular audits so that the refund can start by August itself.

The total crop loan outgo in West Bengal is set to double in this financial year due to additional demands following the debt waiver scheme.

The total crop loan advances from West Bengal State Cooperative Bank (WBSCB) and regional rural banks (RRB), stood around Rs 1,600 crore in FY08. "In a meeting last week, all the three RRBs and the WBSCB spoke about doubling the crop loans in FY09, entailing an additional demand of Rs 1,200 crore," he added.

Nabard has allocated Rs 580 crore and 50 crore as liquidity assistance for West Bengal State Cooperative Bank (WBSCB) and the state RRBs respectively for the current financial year at a concessional rate of 3.5 per cent.

When contacted, Samir Ghosh, chairman, WBSCB, said they are trying to complete the audit process by July.

WBSCB had approached Nabard for Rs 730 crore, over and above the normal allocation of Rs 580 crore.

Nabard hinted at additional liquidity support, but at an interest rate as high as 9 per cent. "Having the funds at 9 per cent and routing them through a two or three tier cooperative structure, the interest rate for the ultimate borrowers cannot be less than 13 per cent, whereas the small and marginal farmers are entitled to a rate not exceeding 7 per cent," said Ghosh.

Nabard has stated that it could reduce the rate of interest provided it received adequate government support. The farm loan waiver for WBSCB amounted to Rs 525 crore, and it disbursed Rs 950 crore as crop loans till March 31 this year.