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Banking & Credit :: CO-OPERATIVE BANKS AND RURAL CREDIT

 

The Co-operative bank has a history of almost 100 years. The Co-operative banks are an important constituent of the Indian Financial System, judging by the role assigned to them, the expectations they are supposed to fulfill, their number, and the number of offices they operate.

Their role in rural financing continues to be important even today, and their business in the urban areas also has increased phenomenally in recent years mainly due to the sharp increase in the number of primary co-operative banks.

Co-operative Banks in India are registered under the Co-operative Societies Act. The RBI also regulates the cooperative bank. They are governed by the Banking Regulations Act 1949 and Banking Laws (Co-operative Societies) Act, 1965.

Cooperative credit structure is the single largest institutional credit delivery system in the State. It provides credit to the people particularly in rural areas at reasonable interest rate thereby reducing the dependency of the farmers on the informal credit source and usurious rate of interest. Geographically and culturally it is the most convenient institutional arrangement for availing the credit by farmers.


The Cooperative credit structure in Tamil Nadu comprises of the following:

(A) Short term and medium term credit structure consisting of Tamil Nadu State Apex Cooperative Bank at the state level, Central Cooperative Banks at the district level and Primary Agricultural Cooperative Banks at the village level.

(B) Long term rural credit structure consisting of Tamil Nadu Cooperative State Agriculture and Rural Development Bank at the state level and Primary Cooperative Agriculture and Rural Development Banks at taluk/block level.

(C) Urban credit structure comprising of Cooperative Urban Banks located in the urban and semi urban areas and catering to the credit needs of their members and the public.

(A) SHORT TERM CREDIT STRUCTURE

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The Short Term Cooperative credit structure in Tamil Nadu is a three tier structure with Tamil Nadu State Apex Cooperative Bank at State level with 45 branches, 23 District Central Cooperative Banks at the district level with 717 branches and 4474 Primary Agricultural Cooperative Banks at the grass root level.

(i) Tamil Nadu State Apex Cooperative Bank Ltd (TNSCB) Chennai

The Tamil Nadu State Apex Cooperative Bank is the federation of the District Central Cooperative Banks. Being the Apex Bank, it raises resources and channelises them through District Central Cooperative Banks for both agricultural and non-agricultural purpose. It also channelises the refinance provided by National Bank for Agriculture and Rural Development (NABARD) towards short term and medium term agriculture and allied sector loans to District Central Cooperative Banks.

The Tamil Nadu State Apex Cooperative Bank maintains a fund called the Primary Cooperative Development Fund financed out of contribution of profit making Central Cooperative Banks and the Tamil Nadu State Apex Cooperative Bank. The fund is utilized to strengthen the infrastructure facilities of the Primary Agricultural Cooperative Banks in the State.

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(ii) District Central Cooperative Banks (DCCB)

The central co-operative banks are located at the district headquarters or some prominent town of the district. These banks have a few private individuals also who provide both finance and management. The central co-operative banks have three sources of funds,

  • Their own share capital and reserves
  • Deposits from the public and
  • Loans from the state co-operative banks

Their main function is to lend to primary credit society apart from that, central cooperative banks have been undertaking normal commercial banking business also, such as attracting deposits from the general public and lending to the needy against proper securities.

There are 23 District Central Cooperative Banks in the State with 717 branches mostly in rural areas to serve the Primary Agricultural Cooperative Banks and the rural public. In addition, they meet the credit needs of dairy, handlooms, sugar and such other affiliated cooperatives. They also lend directly to the public for non-agricultural purposes within the area of operation of their branches.

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(iii) Primary Agricultural Cooperative Banks (PACB)

In Tamil Nadu, there are 4474 Primary Agricultural Cooperative Banks which provide credit to the farmers, distribute inputs like fertilizers and also run outlets under Public Distribution System. These banks provide short term and medium term credit for agriculture and allied activities. The short term loans are repayable within a period of 12 to 15 months and the medium term loans are repayable within 3 to 5 years.

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 (B) LONG TERM CREDIT STRUCTURE

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Long Term Cooperative Credit Structure consists of Apex Bank viz., Tamil Nadu Cooperative State Agriculture and Rural Development Bank, Chennai and 180 Primary Cooperative Agriculture and Rural Development Banks at taluk/block levels. These credit institutions are providing investment credit to the members for activities like minor irrigation, horticulture, plantation crops and other agriculture and allied sectors.

(i) Tamil Nadu Cooperative State Agriculture & Rural Development Bank (TNCSARDB)

The Tamil Nadu Cooperative State Agriculture and Rural Development Bank raises the funds necessary for its lending by floating ordinary and special development debentures.

The Tamil Nadu Cooperative State Agriculture and Rural Development Bank is the apex institution for all primary agriculture and rural development banks constituted for issuing long term loans for the purpose of developing agriculture and allied activities. The bank organized in 1929 has now 20 regional offices each covering one or two districts. The primary agriculture and rural development banks located at taluk and block levels throughout the state are affiliated to the state agriculture and rural development bank.

The main objective of the Tamil Nadu Cooperative State Agriculture and Rural Development bank is to finance primary agriculture and rural development banks. The bank undertakes the following functions to achieve the above objectives:-

(a) Floatation of Debentures;
(b) Receiving Deposits;
(c) Grant of loans to primary cooperative agriculture and rural development banks for purposes approved by the National Bank for Agricultural and Rural Development and Registrar of Cooperative Societies;
(d) To function as the agent of any cooperative bank subject to such conditions as the Registrar may specify;
(e) To develop, assist and coordinate the work of affiliated primary cooperative agriculture and rural development banks.

The bank issues long term and medium term loans towards agricultural and allied activities like construction of godowns, cattle shed, farm house, purchase of lands etc., and for minor irrigation purposes like construction of new wells, deepening of existing wells etc., In addition, long term loans are also sanctioned for animal husbandry, fisheries, plantation, farm mechanization, non-farm sector and other non-minor irrigation schemes.

The state agriculture and rural development bank floats two types of debentures to raise funds required for issuing loans for developmental activities:

(i) Special development debentures subscribed to by National Bank for Agricultural and Rural Development and the Central and the State Government.

(ii) Ordinary debentures subscribed to by State Government, Government of India and other institutional investors.

(ii) Primary Cooperative Agriculture and Rural Development Banks (PCARDB)   

There are 180 Primary Cooperative Agriculture and Rural Development Banks at taluk/block levels.The primary cooperative agriculture and rural development banks provide long term loan assistance to farmers with the period of repayment ranging from 5 to 15 years. They provide credit for developmental purposes like minor irrigation, cultivation of plantation crops and for diversified purposes like poultry, dairying and sericulture on schematic basis. They get requisite financial assistance from the Tamil Nadu Cooperative State Agriculture and Rural Development Bank. At present 181 primary cooperative agriculture and rural development banks are functioning in the state.

In order to widen their scope of lending to compete with other financial agencies, the primary cooperative agriculture and rural development banks have been permitted to finance artisans, craftmen and small scale entrepreneurs. They have also been permitted to issue loans to small road transport operators in rural areas for purchase of goods carriers and passenger vehicles.

As a result, during 2007-08, the Primary Cooperative Agriculture and Rural Development Banks have again started lending for the Non-Farm Sector including Jewel Loans.

The Government will make all efforts to revive them by arranging refinance from National Bank for Agriculture and Rural Development during 2008-09. Activities like horticulture, organic farming, hi-tech farming, precision farming, micro irrigation project based activities like floriculture, cultivation of medicinal plants, plantations in waste land and farm mechanization will be given priority under agricultural investment credit during 2008-09.

The revival package for long term cooperative credit structure based on the recommendations of Prof. A. Vaidyanathan Committee is expected from Government of India soon. In principle, the Government has already agreed to implement the revival package. It is expected that the implementation of this package will help the long term lending structure to wipe out the accumulated loss and to regain its position as the pioneer of agricultural investment credit.

(C) URBAN COOPERATIVE BANKS (UCB)

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Urban Cooperative Banks provide banking and credit facilities to urban and semi urban population. As of now 120 Urban Cooperative Banks are functioning in the State. They mobilize deposits from the public and extend credit facilities for specified purposes. Their lending operations include provision of credit facilities to small traders, artisans and persons belonging to low and middle income group for purposes ranging from housing, business, education, consumer and other non-farm sector activities.

SCHEMES IMPLEMENTED BY COOPERATIVE CREDIT STRUCTURE

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(i) Waiver of agricultural loans
(ii) Interest subvention for crop loan
(vi) Credit supply to weaker sections
(iii) Interest reduction for Non-Farm Sector Loans
(iv) Jewel Loans
(v) Kisan Credit Card Scheme
(vii) Micro Credit Scheme
(viii) Assistance to Self Help Groups
(ix) Women Entrepreneur Loan Scheme
(x) Working Women Loan Scheme
(xi) Maternity Loan Scheme
(xii) Professional Loan
(xiii) Interest free share capital loan to SC/ST members
(xiv) Interest free share capital loan to women members

(i) Waiver of agricultural loans

The unprecedented move of the Government to waive the entire crop loan outstanding in the Cooperative Banks as on 31.3.2006 have benefited lakhs of farmers to break the debt trap besides giving a new lease of life to the cooperative credit institutions.

Following this path breaking efforts of the Government of Tamil Nadu, the Government of India has now made an announcement of massive agricultural loan waiver to the extent of Rs.60,000 crores during 2008-09 budget. This laudable initiative taken by the Government of India to redeem the farm sector from the stagnation is expected to trigger further growth in agricultural sector. It is expected that this loan waiver announced by the Government of India will be fully extended to Tamil Nadu and the amount released already by the Government of Tamil Nadu as loan waiver will be fully compensated by the Government of India on the eligible components.

(ii) Interest subvention for crop loan

The crop loan has been extended with the concessional rate of interest by reducing the effective rate of lending from 9% to 7% with effect from 2006-07. Further to imbibe the discipline of better repayment among the farmers, the Government of Tamil Nadu has ordered to give further interest subvention @ 2% from 2007-08 so that the effective rate of lending of crop loan to the farmers who are prompt in repaying the loans will be 5%.

During 2008-09 budget, the Government have further reduced this rate to 4% for crop loan lending.

(iii) Interest reduction for Non-Farm Sector Loans

The Government have ordered to reduce the rate of interest to 12% on all the outstanding non-farm sector loans as on 31.3.2001 availed from the cooperative credit institutions besides completely waiving the penal interest as a one time measure to wipe out the overdues. Under this scheme, the borrower has to remit 25% of the outstanding and avail the concessions extended and pay the remaining 75% within the stipulated period.

(iv) Jewel Loans

The cooperative banks issue loans on the pledge of jewels both for agriculture and non-agriculture purposes. The jewel loans are more popular among the public and banks are more secure and borrowing is hassle free for the beneficiaries.

(v) Kisan Credit Card Scheme

The Kisan Credit Card Scheme is being implemented to provide timely credit to the farmers so that delay in disbursement of credit is minimized.

(vi) Credit supply to weaker sections

The Primary Agricultural Cooperative Banks are paying special attention to meet the credit needs of weaker sections. NABARD has stipulated to extend not less than 30% of short term lending by cooperatives to small farmers who own or cultivate less than 5 acres. Further, it is targeted to extend 14% of the quantum of loan issued under short term loans and 30% under medium term loans to the members belonging to Scheduled Caste/ Scheduled Tribe.

(vii) Micro Credit Scheme

The District Central Cooperative Banks and Urban Cooperative Banks are implementing this unique scheme to benefit marginalized small and petty merchants and street vendors engaged in the business of selling flowers, vegetables, fruits and running petty shops. They are the most vulnerable group for exploitation by usurious money lenders. Their credit requirements are very small but critical. This scheme which was launched by this Government has been amplified and streamlined over the years. Under the scheme the loan amount upto Rs.5000/- is being provided without any security.

It is proposed to improve the scheme further by issuing credit card to such beneficiaries and organize them as a self help group.

(viii) Assistance to Self Help Groups

Lending through self help groups is considered extremely effective to ensure financial inclusion. It is also beneficial to the banks in terms of better repayment and lower transaction cost. Under various schemes and Government sponsored programmes, lending is extended through self help groups.

(ix) Women Entrepreneur Loan Scheme

The District Central Cooperative Banks and Urban Cooperative Banks are providing loans upto Rs.10 lakhs repayable in 60 monthly installments at 12% interest to women entrepreneurs to start small industries and to take up service activities.

(x) Working Women Loan Scheme

Under this scheme, the District Central Cooperative Banks and Urban Cooperative Banks are issuing loans upto Rs.1.00 lakh at an interest rate of 12% per annum to working women drawing monthly income. This loan is repayable in 36 instalments.

(xi) Maternity Loan Scheme

Cooperative credit institutions are issuing maternity loan to pregnant women upto Rs.2000/- at an interest of 11%.

(xii) Professional Loan

The District Central Cooperative Banks are extending professional loan to doctors and engineers upto Rs.10 lakhs at an interest rate of 12% per annum. This loan is repayable over a period of 15 years.

(xiii) Interest free share capital loan to SC/ST members

In order to enhance the borrowing power of SC/ST members, interest free share capital loan is provided every year.
It is proposed to continue the same and during the year 2008-09, a sum of Rs.20.00 lakhs will be provided to 8000 SC/ST members in the Primary Agricultural Cooperative Banks @ Rs.250 per member and a sum of Rs.5.00 lakhs will be provided to 1000 SC/ST members of Urban Cooperative Banks @ Rs.500 per member as interest free share capital loan.

(xiv) Interest free share capital loan to women members

The borrowing power of the members in the cooperative banks needs to be enhanced. This inevitably requires adequate step up in the share capital. Considering the poor financial condition of the rural women particularly to those belonging to weaker sections, the Government is providing interest free share capital loan as the normal level of borrowing is limited to 20 to 40 times of the share capital investment. This amount is repayable in five installments commencing from the succeeding year in which loan is sanctioned.

It is proposed to extend the scheme of interest free share capital loan to the women members of Primary Agricultural Cooperative Banks, Primary Cooperative Agriculture and Rural Development Banks and Urban Cooperative Banks and physically handicapped persons during 2008 –09 also. Accordingly, it is proposed to issue interest free share capital loan to 2000 women members of Primary Agricultural Cooperative Banks at the rate of Rs. 500/-, five hundred women members of Primary Cooperative Agriculture and Rural Development Banks at the rate of Rs. 1000/- and thousand women members of Cooperative Urban Banks at the rate of Rs. 500/- and 1000 physically handicapped persons at the rate of Rs. 500/- through the above banks.

Source

http://www.tn.gov.in/policynotes/cooperation_2.htm

http://www.lbsnaa.ernet.in/lbsnaa/research/ccrd/saconf(98).htm

http://www.tn.gov.in/policynotes/archives/policy2004-05/pdf2004/cfcp2004_05.pdf

 

 

 



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