Co-operative banks get level playing field

BUDGET & MONEY

These provisions already exist for scheduled banks. Co-operative banks were brought under the income tax net in 2006-07, a step strongly opposed by the cooperative sector. But cooperative banks were left out of the tax sops for provisions made for NPAs and other provisions. Earlier, urban banks were enjoying protection from payment of tax as they were concentrating on the cooperative character. 

ON AN EVEN KEEL
Rs cr	2004-05	2005-06
Interest income	3,322	3,458
Other income	413	494
Expenditure	3,598	3,617
Operating profit	472	682
Net profit	137	335
Total assets	56,217	61,832

 The impact

The measure brings parity between commercial and cooperative banks. It will give a positive push for consolidation in the cooperative banking sector. The stronger urban cooperative banks will now turn more active in acquiring loss-making as well as smaller banks to expand business.

 The effective credit portfolio management will get incentive, especially write-offs, with provisioning being taken into account for arriving at the tax liability.  Cooperative banks would now also be able to boost their capital base through transfer of certain portion of profits to special reserves, with such transfers being eligible for deduction for calculation of taxable income.