Nearly 209 co-oper banks need to raise Rs 4,024 cr by 2014-15 : RBI committee

Banks required to raise Rs 6,498 crore by 2016-17 to achieve a CRAR of 9%

An expert committee constituted by the Reserve Bank of India to examine the functioning of the short term credit cooperative structure has estimated that 209 out of the 370 central cooperative banks (CCB) will have to mobilize an aggregate Rs 4,024 crore by 2014-15 and Rs 6,498 crore by 2016-17 to achieve a CRAR of 7% and 9% respectively.

According to the recommendations of the committee, available with Nabard, bankwise, the amount ranges from as low as Rs 1.84 lakh to Rs 282 crore. The committee has estimated that about 15 CCBs should be able to mobilize the required members  by asking members to contribute amounts ranging from Rs 2 to Rs 4000 over a period of four years.

The committee has also recommended that CCBs may be permitted by the RBI to issue fixed interest bearing deposits of ten years or more, with a lock-in period of five years for its members, and to treat such deposits as tier I capital. These deposits can be converted into regular shares after the CCB achieves the required CRAR.

The committee has also estimated that about 58 CCBs will not be able to mobilize the required capital, or their business sizes are too small that they will not be able to sustain in the long run, and thus will have to be consolidated with others. The committee has suggested that the broad parameters for such consolidations should be a minimum business level of Rs 200 crore for the consolidated CCB and achieving CRAR of 7% by 2014-15 and 9% by 2016-17.

This apart, it has also been suggested that CCBs may be permitted to issue perpetual bonds or debt instruments, to be contributed by states, individuals and other entities, and the same to be treated as tier I capital. Also, RBI may permit tier 2 capital to be treated as tier I capital, to an extent of 150% of tier I capital fund for a period of five years.  

The committee has noted that the share of short term credit structure in providing agricultural credit has fallen to a mere 17% at the aggregate level, although there are pockets where its share is more than 50%. The committee is of the opinion that these cooperative banks must meet at least 15% of the agriculture credit needs in the operational area, with the gradual aim to increase it to 30%.