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Changes in policies of apex National Agriculture and Rural Development Bank (Nabard) have created unrest in the cooperative sector.
The changes have reduced availability of credit to farmers apart from making its costs unaffordable, says National Cooperative Agriculture and Rural Banks Federation (Nafcard).
EXISTENTIAL THREAT
The very existence of state cooperative agriculture and rural development (SCARDBs) is in danger, according to K. K. Ravindran, managing director, Nafcard.
State-level banks are not allowed to take public deposits. They get refinance from Nabard to the extent of 97 per cent of loans issued on the average, with Central and State Governments making up the balance on matching basis.
But Nabard has reduced the quantum of refinance given to 90 per cent of the loan issues from 2011, said Solomon Alex, president, Kerala State Cooperative Agriculture and Rural Development Bank.
Nabard has also introduced a loan system for giving refinance, instead of investment in debentures.
PRE-CONDITION
While doing it, it did not allow time to cooperatives and the State Governments for making changes in the statutes and procedures to draw refinance, Ravindran said.
Nabard is also insisting on a revised guarantee deed by State Governments as a precondition, in place of one already executed for the year.
Thus, refinance against loans issued has been delayed resulting in losses. Disbursement to most SCARDBs has been delayed by up to nine months.
The Himachal Pradesh and Chhattisgarh banks were not given any during 2011-12 as the respective State Governments could not fulfil the new conditions.
Lately, Nabard is insisting on a separate audit by chartered accountants from a panel of auditors drawn by it, said Alex.
STATUTORY AUDIT
In a majority of States, the cooperative department does the statutory audit. A second audit results in doubling of audit expenditure.
West Bengal, Gujarat and Rajasthan Governments had already entrusted the statutory to chartered accountants. Nabard wants a second audit here, too.
Its business with SCARDBs does not involve risk, thanks to an implied State Government guarantee.
But, in reality, agriculture financing involves high risk, which is solely borne by SCARDBs, Ravindran said.
Nabard has steadfastly opposed the idea of sharing of risk with client institutions despite having been advised so by many committees, including the Vyas Committee.
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