RBI approves reforms in primary co-ops

The Reserve Bank of India (RBI) has accepted the recommendations of an expert committee on primary agricultural cooperatives to ring in far-reaching reforms in the three-tier short-term cooperative credit structure.

Assets and liabilities of primary cooperatives will now stand transferred to central/state cooperative banks.

In States where the central/state cooperative banks are fully computerised and on core banking systems, primary cooperatives will function as their business correspondents.

A circular from the head office of National Bank for Agriculture and Rural Development (Nabard) unveiled the reforms to state and central cooperative banks.

Jose T. Abraham, President, All-India Nabard Employees Association, said this would mean the death knell for an estimated 93,000 primary cooperatives in the country. Rather than help financial inclusion, the new reform would only drive poor farmers and rural people to local moneylenders for meeting their credit needs, he added. The employees association would resist implementation of these reforms with all strength at its disposal.

Bhima Subrahmanyam, Managing Director, National Federation of State Cooperative Banks, said he feared a total collapse of the short-term cooperative credit structure.

Nabard had questioned the fundamental rights of cooperatives, he said. It seems to be against autonomy, democratic management, cooperative principles and concept of member-driven organisations, according to him.

ASSETS TRANSFER

Nabard has told state cooperative banks that the assets of primary cooperatives will stand transferred to the books of central/state cooperative bank along with related liabilities. Similarly, all deposits collected will be transferred to the state cooperative bank.

Share capital mobilised from members by way of share-linked capital of the loans provided will now stand transferred to the books of state cooperative banks and will form part of their share capital.

Borrowing members and depositors will have to become members of the state cooperative bank.

Primary cooperatives will not accept deposits on their account anymore and will not do lending operations of any kind on their behalf henceforth.

However, they may carry out these services for cooperative banks.

They can also facilitate the issuing of RuPay debit cards (to be issued by cooperative banks having core banking systems).

They would also work on loan recovery and canvas for deposits on behalf of state cooperative banks on a pre-decided commission or fee basis.

vinson.kurian@thehindu.co.in

Source: Financial Express