The Hindu : National : Chidambaram for early action on rural credit

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Sunday, Jan 08, 2006

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National

Chidambaram for early action on rural credit

Special Correspondent

NABARD asked to make detailed presentation to States

Focus on revival of short-term credit structure Three-pronged programme to provide financial assistance Small and marginal farmers to benefit

P. Chidambaram

NEW DELHI: Finance Minister P. Chidambaram has urged the States to initiate moves for early implementation of the Rs. 13,596-crore short-term rural cooperative credit package approved by the Central Government recently.

In a letter to the Chief Ministers, he said a draft memorandum of understanding would shortly be sent to them for consideration and execution.

Early action sought

He said `early action' was needed by the States to implement the revival package. "In principle'' approval had been given for the report of a task force on revival of short-term rural cooperative credit structures, he added.

The National Bank for Agriculture and Rural Development (NABARD) had been asked to make a detailed presentation of the package and its conditionalities to the States. He expressed the hope that the States would confirm their intention of implementing the package.

Three-pronged plan

The package sought to revive the short-term rural cooperative credit structure to make it a well-managed and vibrant medium to serve credit needs, especially of small and marginal farmers.

The three-pronged programme aimed at providing financial assistance to bring the system to an acceptable level of health, introduce legal and institutional reforms for their efficient functioning and take measures to improve management.

He said all the three components were equally important and should be treated and implemented as an integrated package. Under the scheme, the proposed financial assistance was a one-time measure and the States would have the option of participating in or keeping out of the package. Those choosing to participate would be entitled to financial assistance under the package, if they agreed, through the mechanism of a formal MoU or exchange of letters with the Central Government to implement (in a phased manner and within three years), the legal and institutional reforms envisaged.

First step

Financial restructuring would start by first bringing primary agricultural cooperative societies (PACS) to an acceptable level of health through cleansing of balance sheets and strengthening of the capital base, and then moving on to the upper tiers. This step would enable PACS to clear their dues to upper tiers and thereby reduce the accumulated losses of district central cooperative banks.

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