All-India Nabard Employees’ Association has said that basic features of cooperative credit structure should not be tinkered with until after an informed nationwide debate on the matter.
The demand comes in the context of a Reserve Bank directive to the National Bank for Agriculture and Rural Development (Nabard) that it should pilot the reforms in the cooperative sector.
CENTRE-STATE TIES
The directive could have implications even for Centre-State relations as cooperatives still continue to be in the State list, said Jose T. Abraham, president of the employees’ association.
Conferring overriding powers on the Reserve Bank to issue directions to cooperatives by superseding their elected boards impinges on States’ rights, he added.
Abraham recalled that the Kerala High Court has already stayed implementation of a contentious Nabard circular of July 22.
The circular advised primary agriculture cooperative banks to act as business correspondents of Central/State cooperative banks.
Assets of primary cooperatives arising out of all lending operations will stand transferred to the books of Central/State cooperative banks along with their related liabilities.
All deposits collected would be transferred too. Primary cooperatives will not accept deposits on their own account and will not henceforth do any financial operations of any kind on its behalf.
In this manner, the primary cooperatives would be gradually eased out from business as the bottom-most layer of the short-term cooperative credit structure.
Abraham feared that fly-by-night financial operators would gladly swoop in to fill the vacuum, adding to the problems of the gullible poor.
A team represented by himself, Rana Mitra, vice-president, and Vijay K. Bhosale, general secretary of the association, had taken up the matter with Union Ministers and MPs in New Delhi recently.
ACTION PROMISED
Basudeb Acharya, MP and chairman of the standing committee on agriculture, will submit a memorandum signed by MPs of different political parties to Finance Minister P. Chidambaram. Yashwant Sinha, chairman, standing committee on finance, has promised appropriate action on the matter and was of the view that Nabard was a special developmental institution and needed to be protected for the sake of farmers and rural people.
‘Difficult to survive’
Primary cooperatives will find it difficult to survive in the emerging scenario and will have to contend with non-financial businesses such as public distribution or selling fertilisers.
That subsidies applicable to these operations are going to be withdrawn in favour of direct cash/benefit transfer scheme is not helping matters either, Jose T. Abraham said.
The proposed change in their role will result in more farmers moving away from the short-term cooperative credit structure.
They might be forced to depend on usurious money lenders and micro-credit institutions.
There are close to a lakh primary cooperatives in the country serving different credit needs of rural people, especially farmers, he said.
A recent Reserve Bank study of Ernakulam district of Kerala had found that cooperatives served small farmers and poor people better than commercial banks, he added.
Weakening of primary cooperatives will not only hurt the cause of financial inclusion but may also have repercussions for institutional credit arrangements for small and marginal farmers, Abraham said.