BANGALORE: The two proposals in the Finance Bill of the Union Budget presented by Finance Minister P. Chidambaram relating to the non-scheduled cooperative banks are detrimental to the health of the sector, which is a booming economy, and should be withdrawn immediately, Leader of the Opposition in the Legislative Council H.K. Patil has said.

One of the proposals is the exclusion of cooperative banks from the purview of exemption under Section 80 (P) of the Income Tax Act, 1961.

Mr. Patil, who is chairman of the Karnataka State Cooperative Urban Banks Federation Limited, told presspersons that it will be incorrect to assume that since cooperative banks carried out banking business like commercial banks, they did not require any special treatment in the IT Act.

If that is the case, there would have been no need to introduce Section 80 (P)(2) (i) a few decades ago, he said.

The other proposal, under Section 80(c) proposed that deposits with scheduled banks will now qualify for investment under this section for getting the benefit of tax rebate, provided the deposits were for a minimum period of five years.

Mr. Patil said that very few banks are given scheduled status, and there is apprehension that the non-scheduled urban banks and State and district cooperative banks might now face one-sided competition from scheduled commercial banks.

"Selective incentive to keep funds with scheduled banks should be corrected and the proposal should cover all banks uniformly," Mr. Patil said, adding that he would be making personal appeals to Mr. Chidambaram, Prime Minister Manmohan Singh and the United Progressive Alliance chairperson Sonia Gandhi in this regard.

There are over 3,750 urban cooperative banks in the country, and 301 in Karnataka.

In the centenary year of the cooperative movement, these banks that gave local people employment and contributed to the local economy in a big way, must be given encouragement, he said.

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