Central cooperative banks (CCBs) should strive to have at least 70 per cent of their loan portfolio for agriculture, a Reserve Bank of India (RBI) panel has said. “If a CCB or StCB (state cooperative bank) consistently underperforms and provides less than 15 per cent share of agricultural credit in the operational area, then that bank should be declared and treated as an urban co-operative bank,” the expert committee on Streamlining Short-Term Co-operative Credit Structure said.
The panel expressed concerns that primary agricultural credit cooperative societies (PACS) and CCBs were not performing their role and giving almost 40 per cent of their loans for non-agricultural needs. It also said that “September, 30 2013 be set as deadline for all StCBs and CCBs to be fully operational on CBS and providing RTGS, NEFT, ATM and POS device based services.”
Moreover, it recommended March 31, 2013, as a deadline for CCBs and StCBs to mobilise funds internally or externally to achieve a four per cent Capital to Risk (Weighted) Assets Ratio (CRAR). “A large number of CCBs and some StCBs do not have adequate capital to meet even the relaxed licencing norm of four per cent CRAR. The Committee recommends that March, 31 2013 may be set as the deadline for these banks to mobilise the required capital either internally or from any other external source so as to achieve four per cent CRAR,” it said.
To mobilise funds, it recommended that cooperative banks be allowed to issue fixed interest bearing deposits of 10 years or more with a lock-in period of five years and to treat such deposits as Tier-I capital.
The panel also said the Banking Regulation Act could be amended to give direct and overriding authority to RBI for superseding the Board or removing any director on the board of StCB or CCB. It said government may consider giving income tax exemption to these entities up to 2016-17 for incentivising to achieve nine per cent CRAR. There should be a graded CRAR norms for different business sizes, it added.
It estimated 58 CCBs would not be able to mobilise the required capital, or their business sizes were so small that they would not be sustainable in the long run and would have to be therefore consolidated with other CCBs. The RBI had formed the committee in July 2012 under Nabard Chairman Prakash Bakshi.
