Govt seeks report on state co-op agriculture banks

NEW DELHI: Ahead of the Budget, the finance ministry has sought a fresh report on State Cooperative Agriculture and Rural Development Banks to reassess the strategy for agriculture lending. “The government is committed to reviving the agriculture sector. State cooperative banks can play a significant role in agri lending. However, these institutions are in a sorry state and need fresh planning and thinking. So the government has sought a report on these banks from

NABARD and also from states, where they are in a bad shape or the NPAs are very high,” said a senior official with the finance ministry.Primary co-operatives and regional rural banks account for a significant share of rural and agriculture credit, with NABARD providing support to these institutions. Political interference at the local level in day-to-day working including sanction of loans, deferring of recoveries and recruitment of staff is also adding to the problems.

“Most of these cooperative banks are not able to function well due to local political interference. Also, many of CEOs have non-banking background which is also contributing to the overall failures of both state and district level cooperative banks in the state. That is also adding to the problem,” the official added.
These banks have become liabilities, even for the state governments. According to the recently released data by the Reserve Bank of India (RBI), non-performing assets of primary co-operative agricultural and rural development banks rose to 37 per cent at the end of FY16, up from 36.2 per cent.

The long-term rural credit fund was set up in 2014-15 with NABARD out of the shortfall in priority-sector lending target of scheduled commercial banks to provide long-term refinance to cooperative banks and regional rural banks at reduced interest rate for their long-term investment credit lending in agriculture.

According to the government, internal report, the SCARDBs are fully functional in only 13 states. The state cooperative banks are defunct in Manipur. In Maharashtra and Madhya Pradesh, which also saw farmers’ agitation in the past two years, these banks are under liquidation whereas in states like Bihar, Assam and Odisha, these banks have done no businesses in the past three years.

The official added that there were “letters of supervisory concern” also issued to the cooperation department of the respective state government and the bank concerned for initiating corrective action, however it needs stricter action.