The Hindu : Tamil Nadu News : `Review working of primary cooperative banks'

Online edition of India's National Newspaper
Thursday, Oct 14, 2004

Tamil Nadu

Tamil Nadu

`Review working of primary cooperative banks'

By V. Jayanth

CHENNAI, OCT. 13. Farmers trace the recent debate over "inadequate" distribution of farm loans in the delta districts to the basic problems in cooperative banks — of non-payment of dues and frequent waiver of penal interest, interest or even loans by successive governments.

They want the Government and the Registrar of Cooperative Societies to order a review of the accounts and functioning of the primary agricultural cooperative banks (PACBs) to find ways of restoring their financial health.

From the district central cooperative banks in many cases to the PACBs in most places, the farmers feel the need for an overhaul of the accounting processes and procedures.

"Their accounts have not been reconciled in most cases. There are no set procedures, no documentation and as a result of the not-too-infrequent waivers announced by the Government, they have become non-viable entities," admits a retired Joint Registrar.

He recalls the confusion some government decisions created in the cooperative network of banks — in the mid-1980s, the State Government announced a waiver of loans; it came up with a drought relief package in 1996 and a flood relief package in 1997. Many of the PACBs in the delta districts could not reconcile the relief. Similarly, there was a Central order restructuring short-term agricultural loans taken prior to 1999 into medium-term loans.

Another problem facing the farmers, he says, is adjustment of new crop loans towards old dues. As a result, only the loans get updated and the farmer gets very little. The PACBs continue to show the outstanding loans in each of their accounts, keeping themselves on the "ineligible list".

No cash liquidity

Now, the Centre has asked the States to "consolidate" all cooperative dues as of March 31, 2004. This calls for a massive accounting exercise.

"While all this is done on paper, it has not provided any cash liquidity to the cooperative banks," regrets the secretary of a society in Tiruvarur district. Unless they have cash to rotate, it becomes difficult to advance more funds, especially when there is a commitment to depositors.

This year, many banks were not even able to pay depositors their interest, he says.

Official circles here say cooperative loans may account for hardly one-fourth of the advances to the farm sector. It is the commercial banks which deal with the bulk of agricultural loans and they have clear-cut norms — advances are given only against some security.

Land records, a problem

The officials say land records are also becoming a problem. The law recognised only cultivating tenants.

Quite often, the tenants either pledged or "sold away" land under their cultivation, particularly temple land and trust property. "That is one reason for the temples getting little or no returns on their land," explains a revenue official.

According to the Cauvery Delta Farmers Welfare Association secretary, S. Ranganathan, in the composite Thanjavur district, there are about 36 lakh people involved in agriculture, of whom 14 lakhs are labourers.

A majority of the remaining 22 lakhs were small and marginal farmers.

While the medium and big farmers could arrange for loans with commercial, mostly nationalised banks, the small farmers depend on cooperative banks. If the banks had money, the farmers were ineligible; if the farmers were eligible, the banks had no funds — they gave only no-objection certificates to commercial banks for borrowings by farmers. That did not materialise.

At least for the next year, the farmers want the Government to set the cooperative house in order and cleanse it of local political influences so that genuine farmers can benefit from the cooperative banks.

Meanwhile, the commercial banks have stoutly denied reports that they are not lending enough to the farm sector.

They have emphasised that they are fully implementing the farm credit policy announced by the Centre, besides assistance extended under Centrally-sponsored schemes.

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