The Hindu : Business : Nabard sanctions Rs. 342 crore to KSCB

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Thursday, Oct 05, 2006
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Nabard sanctions Rs. 342 crore to KSCB

Staff Reporter

THIRUVANANTHAPURAM: Nabard has sanctioned Rs.342.65 crore at 2.5 per cent interest to Kerala State Cooperative Bank (KSCB). It is meant for distribution as crop loans through the cooperative sector at an interest of less than seven per cent.

The loans will be routed through 11 of the 14 district cooperative banks (DCB) in the State.

Three DCBs - Kottayam, Ernakulam and Palakkad - are, at present, not eligible for assistance from Nabard due to their inability to comply with certain statutory requirements.

Had these banks been eligible, all the 14 DCBs would have got a share in the total allocation of Rs.650 crore at 2.5 per cent from Nabard. Also, Kerala State Cooperative Bank (KSCB) would have got higher refinance from Nabard had it been organisationally stronger.

Besides Nabard's support, `primary agriculture credit societies' (PACS) - called `primary service cooperative banks' in Kerala - are also looking forward to similar interest subvention from the State Government and the Centre.

Of the estimated Rs.2,200 crore crop loans likely to be disbursed during 2006-2007, almost half will come from the PACS themselves. Of the remaining Rs.1,100 crore, about Rs.600 crore will be pooled in by 14 DCBs.

In respect of the balance Rs.500 crore, Nabard has already sanctioned Rs.342.65 crore . The KSCB's own share is much less.

The PACS in the other States have very meagre resource base of their own. They depend almost entirely on borrowed funds received at concessional rates, from DCBs and SCBs, who in turn need sizeable support from Nabard.

Unlike that, the PACS in Kerala deploy their own resources - the deposits mobilised from the public at the village level - on which they pay interest ranging from 7.25 per cent to 8.5 per cent.

As almost half of their total crop loans are provided by the PACS from such deposits, their losses on this business have to be made good by the upper tiers of cooperative structure, that is, DCBs, SCBs, and by the Governments.

The PACS are the foot soldiers of the cooperative movement. They distribute crop loans to thousands of farmers. They bear the first brunt of every single scheme or relief announced, whether it is one-time settlement, interest waiver or interest concession, moratorium on recovery, postponement of demand or loans re-schedulement. They are seldom compensated fully.

There is this peculiar `reverse funds flow' in Kerala cooperatives. The PACS are the primary source of deposits. From these deposits they lend, locally, as much as they can and then keep the surplus resources with the DCBs.

The DCBs in turn add up to this their own deposits, mobilised directly and lend to their borrowers - including some of the PACS. They keep their surpluses with the KSCB.

The result: as of today, almost 56 per cent of the total deposits of the DCBs come from the PACS. Only six per cent of the total deposits of the KSCB is mobilised directly through its own branches - the rest, a whopping 94 per cent, is sourced from DCBs.

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