State eyeing central funds to bail out co-op banks

The state government has yet again made a strong pitch for getting its dues worth Rs 930 crore pending from the Vaidyanathan Revival Package to bail out six district co-operative banks that are in red and stand to lose their banking licence.

The state government has yet again made a strong pitch for getting its dues worth Rs 930 crore pending from the Vaidyanathan Revival Package to bail out six district co-operative banks that are in red and stand to lose their banking licence.

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The district co-operative banks are the sole agriculture credit line and if they lose their licence, there would be trouble for farmers.

However, with state exchequer already in deficit, chief minister Prithviraj Chavan is not keen on bailing out the banks. The six banks—Jalna, Osmanabad, Wardha, Nagpur, Buldhana and Dhule-Nandurbar—need Rs551 crore to improve their finances.

As a solution, both Chavan and Union agriculture minister Sharad Pawar had pitched for the pending funds under the Vaidyanthan package. However, Union finance minister P Chidambaram is not keen on this and had argued that the package had lapsed two years ago.

In a meeting chaired by the secretary of financial services in the capital on Wednesday, it was decided that National Bank for Agriculture and Rural Development (NABARD) would prepare a report on the implementation of this package within a couple of days. Based on this report, a decision would be taken on whether the state can still get these funds. The RBI is yet to get back to the state government on whether it will grant an extension of six months as requested by the state. The earlier extension of the banks lapsed on September 30 and the banks cannot continue banking operations from October 1. However, the RBI is likely to wait for the NABARD report before further action.

However, sources said that the Centre is keen on checking if the package has ushered in reforms in the rural credit structure or whether these funds have been moped up to cover financial indiscipline and mismanagement.