Strengthening the Co-Operative Banks: 7 Recommendations

The following points highlight the seven main recommendations of the government for strengthening the co-operative banks. The recommendations are: 1. Reorganisation of PACSs 2. Business Development Plans (BDPs) for PACSs 3. Deposit Insurance Scheme for PACSs 4. Kisan Credit Card (KCC) Scheme 5. Institutional Strengthening Programme (ISP) and Others.

Recommendation # 1. Reorganisation of PACSs:

The process of reorganisation of PACSs has been started on the model laid down by the NABARD. It envisages an area of operation of 5 km. radius and a potential loan business of Rs.13.50 lakhs for the reorganised society. Except in Maharashtra and the Kashmir region of J & K, the process of reorganisation of PACSs has been completed. However, the majority of states have not achieved the norms laid down by the NABARD though they have completed the reorganisation work.

Recommendation # 2. Business Development Plans (BDPs) for PACSs:

In view of the poor financial position of PACSs, the Government of India has launched a business- oriented development programme for PACs. The programme envisages preparation of BDPs for selected PACSs for implementation in a phased manner.

Its aim is to develop selected societies in certain States into viable units to serve all socio-economic groups in their areas of operation through economically viable activities. It is expected to cover, in phases, all PACSs in the country.

Recommendation # 3. Deposit Insurance Scheme for PACSs:

The main thrust of BDPs is on deposit mobilisation by PACSs. But the absence of deposit insurance has been the major constraint in deposit mobilisation at the PACS level. To overcome this, the Government of India has formulated a model deposit insurance scheme for PACSs to create a sense of security in the depositors. The scheme would be applicable only to viable PACSs which are implementing BDPs.

The scheme lays down the following conditions:

(a) The PACSs covered under the scheme should have deposits of maturity period of more than 6 months;

(b) Such deposits should be at least Rs.25,000 per society;

(c) The accounts of the society should be maintained regularly.s

Recommendation # 4. Kisan Credit Card (KCC) Scheme:

This scheme was introduced in 1998-99 with a view to facilitating the flow of timely and adequate short-term credit to farmers. The KCC scheme is an on-going scheme which is meant to gradually replace the traditional system and procedures in the short-term crop, loans.

Loans disbursed under the scheme have also been brought under the Krishi Bima Yojna of the General Insurance Corporation. KCCs are issued to eligible farmers for even amounts below Rs.5,000 per card by cooperative banks, Regional Rural Banks and commercial banks in rural areas.

Recommendation # 5. Institutional Strengthening Programme (ISP):

The ISP aims at making non-solvent banks such as SCBs, DCCBs, State LDBs and PLDBs as viable units within a period of 3 to 5 years. The programme includes investigation of over-dues, measures for their recovery, rationalizing loans policies and procedures, expansion and diversification of loan portfolio, mobilisation of resources, revitalisation of primary cooperative societies, reduction in management costs, and redeployment of manpower and resources, etc.

The programme also requires administrative support and financial assistance from Central and State Governments, RBI and NABARD. The banks which fall to become viable within 3 to 5 years would not be given refinance facility by the NABARD and alternative arrangements would be made to maintain credit flow in these banks.

Recommendation # 6. The Model Cooperative Societies Act:

The Planning Commission appointed a committee to review the status of cooperative laws which submitted its report on the Model Cooperative Societies Act in May 1991. The main thrust of the Act is to impart a federal character to cooperatives, facilitate self-reliance and to minimise Government control and interference.

The State Governments have been asked by the Planning Commission to incorporate the amendments to the Model Act in a phased manner. So far, only Orissa State has accepted it fully and implemented it. Some States have yet to initiate legislative action while others are in the process of taking action.

Recommendation # 7. Integrated Cooperative Development Projects (ICDPs):

The National Cooperative Development Corporation launched a scheme during the Seventh Plan for Integrated Cooperative Development Projects for selected districts. The scheme aims at strengthening and developing cooperative infrastructure in order to cater to the overall needs of the rural community in selected areas of districts.