Relief for Maharashtra farmers as district cooperative banks can deposit banned notes with RBI
Mumbai city news: The state has also asked private and nationalised banks to disburse an interim loan of Rs10,000 each to the farmers ahead of sowing seasonmumbai Updated: Jul 11, 2017 09:02 IST
In a move that aims to ease the state’s distressed farm sector, the Reserve Bank of India (RBI) has allowed district central cooperative banks (DCCBs) to deposit demonetised currency worth Rs2,772 crore with it by July 20.
The Opposition has, however, questioned the timing of this move. Former finance minister P Chidambaram tweeted “Was the midnight notification perfectly timed with garnering support for Presidential candidate?”
Hours before the notification, the Shiv Sena endorsed the candidature of NDA nominee for president Ram Nath Kovind.
The state has also asked private and nationalised banks to disburse an interim loan of Rs10,000 each to the farmers ahead of sowing season.
The DCCBs play a significant role in providing credit to the farm sector. But many of the DCCBs have been facing a liquidity crisis because the RBI had refused to exchange the demonetised currency they had accepted from their account holders — a majority of whom are farmers.
The DCCBs were allowed to accept the banned notes only till November 14, although commercial banks and post offices were allowed to accept the junked currency from the public until December 30. Demonetisation was announced on November 8.
The RBI had barred the DCCB from depositing the junked notes claiming the notes had no legitimate trail to prove. The DCCBs had moved Supreme Court for the exchange claiming the notes collected by them were legitimate. With the stacks of old notes lying with them, the DCCBs had written to the state government about their inability to disburse the interim loan of Rs10,000 crore to the farmers, which is part of farm loan waiver that will be announced in October.
The state government, which drew flak from the farmers for the delay in the disbursement of the loan, intervened and held a meeting with DCCBs, private and nationalised banks. “The banks have been given a guarantee for the interim loan they disburse. The Maharashtra State Cooperative Bank (MSCB) [the state’s apex bank] will help them extend the loan, while the RBI will issue a notification that the state will repay interim loans disbursed by nationalised banks,” Deepak Kesarkar, minister of state for finance said after government’s meeting with state level bankers committee on Tuesday. Of the 31 DCCBs, about 16 are financially weak and will need propping from the MSCB.
The banks have been directed to begin distributing the loan within two days. The banks are likely to give out the loan by opening new accounts to reap the benefit of interest-free loan up to Rs1 lakh. “The banks should disburse the interim loan to all the crop loan account holders with immediate effect, without looking into the parameters set by the government. The banks have to just take a self declaration from the farmers. The government will repay the amount of the interim loan, with interest, to the banks immediately after they have been claimed by them,” Fadnavis assured the bankers during the meeting.
In Maharashtra, 31 DCCBs have a stock of Rs2,772 crore. The Pune DCCB has the highest stock of junked notes worth Rs574 crore, followed by Nashik at Rs 341 crore, Sangli at Rs 316 crore and Kolhapur at Rs 280 core.
The banks were facing financial burden of the junked notes and also had to pay interest to the account holders for the past seven months.
Besides CM Fadnavis, NCP chief Sharad Pawar and Shiv Sena chief Uddhav Thackeray had asked Union finance minister Arun Jaitley to allow DCCBs to deposit the junked notes. Fadnavis welcomed the RBI decision and said it will help them to give fresh loans to the farmers.
Pramod Karnad, managing director of the MSCB, said, “The decision of allowing DCCBs to exchange the notes will help them in improving the cash flow and disburse loans to the farmers. DCCBs will disburse Rs1,350 crore as farm loans.”
Hasan Mushrif, who heads the Kolhapur DCCB, said, “Nabard has checked the legitimacy of the deposit of the banned notes after we moved Supreme Court. The government should also shoulder the responsibility of paying us the interest we have been paying to account holders. The daily burden of interest on the banned notes with us Rs15 lakh.”