THE COOPERATIVES Department has opposed the plethora of preconditions imposed by the Finance Department for releasing the subsidy amount to the cooperative institutions, so as to enable them to provide farm loan at 7 per cent interest rate.
The Cooperatives Department has described these preconditions as ‘against the interest of farmers as well as cooperative institutions’ and has demanded to relax them. The Cooperatives Department also demanded the Finance Department to provide 5 per cent interest subsidy without including the amount of interest subsidy provided by the Government of India.
The new diktat of the Finance Department issued on January 29 has created ripples among the cooperative institutions. One preconditions said, “Those cooperative banks that have received financial assistance from NABARD would not be given any interest subsidy”. This would make many banks ineligible for getting the interest subsidy.
The Cooperative Department has also opposed the precondition that of interest subsidy be given to only those banks who would get the amount calculated by Chartered Accountants and produce a certificate for the same.
The officials of Cooperatives Department submitted a representation to the Finance Department demanding relaxation from these conditions.
Even after making announcement of providing farm loan at 7 per cent interest in November last, the State Government yet not released subsidy amount of Rs 51 crore to various banks.
According to sources, the department is learnt to have pointed that any delay in providing interest subsidy would eat up the resources of cooperative institutions.
Worried over declining credit flow from the cooperative banks and continuous reduction in their market share because of exorbitant interest rates charged by them, the Madhya Pradesh Government had decided to give a handsome ‘interest subsidy’ to cooperative institutions. The decision was taken in November with the aim to enable the banks and societies of ailing cooperative sector to compete with commercial banks and regain its popularity in the agriculture sector.
Talking to the Hindustan Times, Apex Bank Managing Director Sushil Mishra admitted that the Cooperatives Department has opposed fresh conditions imposed by the Finance Department. “We have demanded to release the committed amount as soon as possible and to provide five per cent interest subsidy without including the amount of subsidy in it,” said Mishra.
Sources in the department also conceded that if the conditions of the Finance Department were implemented, over 50 per cent of banks and PACS would not get the benefit of interest subsidy and they would find themselves in severe financial crisis.
On the one hand they (co-op institutions) have to bring down rate of interest to 7 per cent, on the other, financial assistance would not be not provided to them, as a result of which, liquidity of these institutions would also be affected, they added.