PCBs need to shift to new payment regime

The National Bank for Agriculture and Rural Development (NABARD) is willing to take up with the Reserve Bank of India (RBI) the issue of relaxing the time frame set for the 1,603 Primary Cooperative Banks to move over to the new payment regime, and also fund the development of an Information and Communication Technology (ICT) solution that could address their concerns. Kerala chief regional manager of NABARD R. Amalorpavanathan told media persons here on Tuesday that the bank had only suggested the business correspondent model to cooperatives. The RBI had allowed them a one-year window to join the mainstream or be left out at their own risk.

The bank would call a meeting of experts on August 17 as part of its efforts to evolve the new solution. A high-level committee should be constituted with people from various departments for finding solutions and implementing the RBI decision to move over to the new regime.

PCBs did not form part of the ‘payments’ system as envisaged under the National Payments Corporation of India and would have to bear consequential risks. At risk was their very business model that was out of sync with mainstream banking.

Among other things, a circular issued by the bank recently had enunciated guidelines on primary cooperatives taking up the role as business correspondent of district cooperative banks, subject to conditions. PCBs were required to transfer all assets and liabilities to the district bank, subject to legal provisions contained in the State Cooperative Societies Act.

While acting as business correspondents, they were not authorised to carry out any financial business or services in their own books of account. Mr. Amalorpavanathan said the National Payments Corporation of India was the Indian equivalent of Visa/Mastercard platform for routing payments between financial institutions/banks.

No entity without a banking licence could hope to be a member of the payment system. So this ruled out membership for primary cooperatives unless they associated with an entity holding a bank licence.

This would, in turn, lead to flight of business since customers would not be able to source subsidies and other payments from the government under the direct benefits transfer system.

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