The State government’s efforts to get cooperative banks to extend higher volumes of short-term credit to the commoners is likely to prove ineffective given the denial of short-term refinance by the National Bank for Agriculture and Rural Development (NABARD) to the State’s cooperative sector and the State’s own failure to strengthen the Primary Cooperative Banks (PCBs).
According to sources in the cooperative banking sector, the NABARD did not allocate any fund for the State’s cooperative sector in 2013-’14. It had, in 2012-’13, extended Rs.960-crore support to the Kerala State Cooperative Bank for short-term lending through District Cooperative Banks (DCBs) and PCBs. Since the cooperative banking sector is cash-strapped, small and medium farmers, traders and others who depend heavily on the cooperative banks during exigencies have no other option but to rely on private moneylenders. This is reflected both in the sharp fall in short term-credit extended by the PCBs and DCBs and the spurt in illegal moneylending business in the State, they said.
Accessibility and concessional interest rates were some of the factors which prompted them to depend on cooperative banks. A wide network of 1,603 PCBs thus played a pivotal role in short-term lending to the financially weaker sections. Once the refinance support dried up, the PCBs had to virtually wind up this facility. Against the 7 per cent interest of cooperative banks, the private lenders charge up to 120 per cent interest. Those promptly repay the loans are eligible for a 3 per cent subvention too.
While launching a drive against loan sharks, no serious thought have been made for strengthening the PCBs by providing automatic teller machines and other facilities to retain its dedicated clientele, the sources said.
Based on the suggestions of a committee headed by Prakash Bakshi appointed by the Reserve Bank of India in 2012 for examining the three-tier short-term cooperative credit structure, there was a move to curtail the functions of the PCBs in the State. But the move had to be dropped in the face of stiff resistance from the cooperative sector. Had the government implemented the committee’s suggestions, it would have proved to be disastrous for the State, the sources said.
