The Uttar Pradesh government is working on a blueprint to infuse fresh capital in 16 ailing District Cooperative Banks (DCB).
The government will inject almost Rs 80 million in each of the 16 DCBs operating in Faizabad, Shravasti, Allahabad, Sitapur, Hardoi, Azamgarh, Fatehpur, Gorakhpur, Basti, Ballia, Siddharthnagar, Deoria, Sultanpur, Jaunpur, Ghazipur and Bahraich districts. These DCBs have multiple branches operating in their respective regions.
UP cooperative minister Mukut Bihari Verma told Business Standard that each DCB would be infused with fresh capital of Rs 40-80 million, depending on the need, to help them restart normal banking operations.
He said there was a budget of about Rs 12 billion to usher in a turnaround in these cooperative institutions, which are currently bogged down by liquidity crunch, non-performing assets (NPA), lack of resources etc. In all, there are 50 DCBs functioning in the state, of which only about a dozen have sound financial position, while the rest are either loss making or lying defunct.
DCBs provide soft loans to Primary Agricultural Credit Societies (PACS), which are the smallest co-operative credit institutions in the country’s hinterland, supporting short term farm and crop loans to farmers. DCBs also provide long term loans directly to farmers on case to case basis.
Earlier, these 16 DCBs had been served notices by the Reserve Bank of India (RBI) for failing to adhere to financial and licensing norms. However, now these banks have been provided with fresh licenses, yet their financial situation is still not sound enough to start operating unless there is funds infusion for lending to the priority sectors, including agriculture and small businesses. Together, these DCBs employ about 8,000 people.
The revival package of these banks also have component to be shared by the Centre, which had earlier announced similar schemes for DCBs operating in other states too under the proposed tripartite agreement between the Centre, concerned state and NABARD.
“We would also provide Rs 500,000 capital to the smaller cooperative societies in the state to reenergise them. The proposal has been approved and the same would get translated on the ground sooner than later,” he claimed.
Apart from DCBs, there are 323 branches of UP Sahkari Gram Vikas Bank Limited (UPSGVBL) and about 1,352 branches of UP Cooperative Bank Limited (UPCBL) operating across the state. UPCBL, which is primarily a refinance agency, sources soft loan from NABARD to further pass on these funds to DCBs and other financial institutions on low interest rates.
Meanwhile, Verma has also directed officials to expedite crop loan waiver cases pertaining to the cooperative department and implement the action plan submitted by NABARD to streamline the functioning of the various financial institutions. “We would make judicious utilisation of our resources to promote DCBs and other cooperative societies.”