Consolidate co-op banks, says Pawar

Union agriculture minister Sharad Pawar today made a strong pitch for consolidation among co-operative banks.

"The financial sector is undergoing transformation on account of globalisation. In this competitive environment even co-operative banks need to acquire size," Pawar said at a seminar organised by the Maharashtra State Co-operative Bank in Mumbai.

Citing the example of Global Trust Bank (GTB) merger with Oriental Bank of Commerce (OBC), Pawar urged co-operative banks to acquire economy of scale.

He emphasised the need to empower the shareholders of co-operative societies.

The government is planning to make necessary amendments to the Co-operative Act to ensure effective working of co-operatives, Pawar added. The government seeks to amend the Act to ensure shareholder participation in board elections and appointments of auditors.

He urged bank managements to reduce their cost of operations by realigning rates on deposits in line with that of commercial banks. Co-operative banks also need to increase their share in agriculture lending, Pawar said.

The share of co-operative bank lending to the agriculture sector has dipped from 43 per cent in the 1990's to around 27 per cent, he added.

On the Reserve Bank of India (RBI) vision document on co-operative banks, Pawar said the report needs some changes which can be made after holding discussions with relevant authorities.

The Maharastra Urban Co-operative Bank's Federation has called for a one day strike on April 25 in protest of the vision document.

The federation said that around 662 co-operative banks in Maharashtra will be closed on April 25. Most multi-state co-operative banks, however, told Business Standard that they would not participate in the strike.