Future tense for co-operative banks?

As the Union cabinet approved ordinance to bring co-operative banks under the purview of Reserve Bank of India (RBI), concerns have been raised over the future of

As the Union cabinet approved ordinance to bring co-operative banks under the purview of Reserve Bank of India (RBI), concerns have been raised over the future of the co-operative banking sector that plays an important role in state’s agriculture and rural economy.

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Experts believe that some provisions in the ordinance will put the existence of the sector in danger as they will ultimately lead to its conversion in to commercial banking system and defeat its core principles and objectives.

Vidyadhar Anaskar, chairman, Maharashtra State Cooperative (MSC) Bank, said some provisions are welcomed as they will help in removing scope of financial irregularities, but others are likely to finish the sector. “The new ordinance will empower the RBI to remove directors or the entire board in case of any financial irregularities and can also appoint administrators. These reforms should be welcomed. But other provisions will lead to disaster for the sector,” he said. “For instance, we have to list it as a company and anyone can take all shares and rule it against today’s scenario that irrespective of the share-holding, a member will have the right of only one vote. It means all the shareholders have equal rights, which will not be same once new provisions will be implemented,” Anaskar said.

“Similarly, capital of cooperative bank shares can be increased by a single source which is called as share linkage on loan. It means the borrower has to buy 5% shares of the total amount against unsecured loan and 2.5% shares against secured loan. But now RBI will allow us to borrow by the way of debentures, bonds preferential shares etc. which is against the principles of co-operative movement,” he said.

The co-operative movement of the state has a three-tier co-operative credit structure, led by the Maharashtra State Co-operative Bank, the apex body for all DCC banks.

The district-level banks (DCCB) are in the middle and 21,214 Primary Agricultural Credit Societies (PACS) are at the bottom. Around 48.39 lakh borrowers of crop loan are from DCC banks, while members of PACS are around 1.09 crore, majorly farmers. The cooperative banks and societies play a major role in the state’s agriculture sector as well as rural economy.

A majority of the DCC bank boards are under the control of Congress and NCP leaders.

NCP chief spokesperson and minority affairs minister Nawab Malik said the BJP is working on its old agenda to end cooperative movement.

“The BJP wants to end cooperative movement in the country, which is an alternative to capitalism,” Malik said.

State Congress spokesperson Sachin Sawant said, “Even this year, the cooperative banks of the state have sanctioned 46% crop loan of the total target whereas commercial banks have sanctioned only 7% crop loan. But since PM Narendra Modi-led government has come to power, several such decisions have been taken to dismantle the cooperative movement.”

BJP spokesperson Madhav Bhandari said the decision should be welcomed as it was going to safeguard the interest of depositors.