The Hindu : Tamil Nadu / Chennai News : Concern over negative fallout of move to amend banking law

Online edition of India's National Newspaper
Monday, Apr 12, 2004

Tamil Nadu

Tamil Nadu - Chennai

Concern over negative fallout of move to amend banking law

By Our Special Correspondent

CHENNAI, APRIL 11. Officers of the Tamil Nadu State Cooperative (TNSC) Bank — one of India's better performing apex cooperative banks recording continuous profits — are concerned at a possible negative fallout of the proposed Banking Regulations (Amendment) and Miscellaneous Act 2003.

As per the proposed amendments, cooperative banks will be called cooperative banking societies and primary agricultural cooperative banks (PACBs) will not be able to do banking business. They will enable the Reserve Bank of India to make direct appointments to individual banks on certain conditions. There were other proposals on licensing, branch opening, etc.

A resolution at an annual meeting of the TNSC Bank Officers Association here on Friday noted that if the Bill (now before a select committee of Parliament) was passed, the Registrar of Cooperative Societies and the Cooperation department in the State might not have control over the PACBs; and the Cooperative Societies Act and Rules might be rendered redundant.

Noting that the amendments had positive and negative features, the resolution urged the Central and State governments to ensure that the Amendment Act helped in improving the working of the cooperative banks.

Giving an overview of the cooperative banking sector in Tamil Nadu, the TNSC Bank special officer, P.S. Thirugnanam, said the bank was addressing these issues on all forums. The new Non-Performing Asset (NPA) norms sought to be imposed on the cooperative banks could deal a blow to the entire sector. The PACBs and DCCBs (district cooperative central banks) were unable to recover agriculture loans in the face of continuous monsoon failure. Also, there were periodical announcements of interest and principal waiver for farm loans.

Thus, the total NPAs of the 23 DCCBs were now Rs. 727 crores. Another challenge the cooperative banks faced today was a NABARD (National Bank for Agriculture and Rural Development) proposal to directly provide refinance to DCCBs.

"We are writing to the government to remove the restrictions being imposed on the apex institutions to provide funds for a programme to cleanse the balance sheets of PACBs and to change the NPA norms."

The TNSC Bank, one of India's oldest apex cooperative banks, had 23 DCCBs and 4,567 PACBs, with total equity and reserves of Rs. 2,000 crores and a deposit base of Rs. 15,000 crores.

The apex bank earned a profit of over Rs. 40 crores this year. The entire sector developed an extensive network and expertise for reaching out to rural borrowers and delivering credit to the agriculture, weaving and sugar sectors and now to self-help groups.

Mr. Thirugnanam said the TNSC Bank planned to open 10 ATMs in Chennai soon.

The association president, M. Dharmarajan; the general secretary, B. Mohanasundaram; and the president, All-India Coop. Sector Bank Officers Federation, K.V. Acharya, lashed out at privatisation of the public sector and cooperative organisations.

Highlighting the role played by the public sector banks in economic and social development, in the face of terrorism and hostile environment, they said trade unions were duty-bound to oppose the liberalisation-privatisation-globalisation trends, which not only led to the flight of capital from the country, but also threatened the strong development models created by the public sector.

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