Rural cooperative credit institutions have played a large role in providing institutional credit to the agricultural and rural sectors in the past. Typically, these credit institutions have been part of two distinct structures, commonly known as the short term cooperative credit structure (ST CCS) and the long term cooperative credit structure (LT CCS) in each state. The ST CCS, comprising primary agricultural credit societies (PACS) at the village level, district central cooperative banks (DCCBs) at the intermediate level, and the state cooperative bank (SCB) at the apex level, primarily provides short term crop loans and other working capital loans to farmers and rural artisans, although over the last few years, it has also been providing longer duration loans for investments in the rural sector. The LT CCS, comprising state cooperative agriculture and rural development bank (SCARDB) at the state level and primary (P) CARDBs or branches of SCARDB at the decentralised district or block level, has been providing typically medium and long tem loans for making investments in agriculture, rural industries, and lately housing.
Over the past 10 years, however, not only has the share of the CCS in agricultural credit fallen from 62% in 1992-93 to 34% in 2002-03, its financial health has also seen a downturn. Accumulated losses in the ST CCS have been estimated at almost Rs. 10,000 crore, and those in the LT CCS at about Rs. 4,000 crore.
Various committees had been set up in the past to enquire into the problems faced by the CCS institutions, and to make recommendations for their revival. No concrete action was however taken on these recommendations due to various reasons.
The Government of India (GoI) appointed a Task Force under the Chairmanship of Prof. A Vaidyanathan in 2004 to analyse the problems faced by the CCS institutions and to suggest an action plan for their revival. The draft report of the Task Force on ST CCS was put in the public domain for comments in January 2005, and after considering the responses on the draft report, the finalized Report of Task Force on Revival of Rural Cooperative Credit Institutions (in the ST CCS) was submitted to the GoI in February 2005. The draft report of the Task Force on LT CCS was put in the public domain for comments in January 2006, and after considering the responses on the draft report, the finalized Report of the Task Force on Revival of Rural Cooperative Credit Institutions (in the LT CCS) was submitted to the GoI in August 2006.
During 2005, the GoI had extensive discussions with the state governments on the recommendations of the Task Force on ST CCS, and a consensus was achieved on the Revival Package that could be implemented across the country. This Revival Package for STCCS was communicated to the state governments in January 2006.
A series of meetings were held by GoI during October 2007 to February 2008 to discuss the recommendations of the Task Force on Revival of the Long Term Cooperative Credit Structure (LTCCS). It has been announced in the Union Budget 2008-09 that the Central and State Govts. have agreed upon a Package to implement the Prof. Vaidyanathan Committee report on reviving the Long Term Cooperative Credit Structure (LTCCS).
The Revival Package for STCCS focuses on introducing legal and institutional reforms, which will enable the cooperatives to function as autonomous member centric and member governed institutions. These reforms will enable wider access to financial resources and investment opportunities, remove geographical restrictions in operations as well as mandated affiliations to federal structures, and provide administrative autonomy to cooperatives at all levels. Suitable amendments in the BR Act and certain provisions in the NABARD Act are also contemplated.
In addition to providing resources for covering the accumulated losses in the ST CCS as on 31 March 2004 , the Package also provides for taking cooperatives to a minimum level of CRAR of 7%, and meet the costs of computerization of the accounting and monitoring system and specific human resource development initiatives at all the levels of the ST CCS. The sharing of the accumulated losses between GoI, State Government and the CCS is based on the concept of origin of losses rather than any arbitrary proportions.
NABARD has been designated the Implementing Agency for implementing the Revival Package in all the states. The Department for Cooperative Revival and Reforms (DCRR) has been constituted in NABARD for this purpose. NABARD is providing dedicated manpower at the national, state and district levels for implementing the Package.
A National Implementing and Monitoring Committee (NIMC) not only monitors the implementation of the Package regularly, but also takes necessary decisions on policy and operational matters.
The programme implementation is guided and monitored within each state by the State Level Implementing and Monitoring Committee (SLIC) and by the DCCB Level Implementing and Monitoring Committee (DLIC). The concerned Regional Office of NABARD supports the SLIC while each DLIC is supported by a dedicated DCCB level support team (DLST) comprising officers from NABARD, DCCB and Cooperation department.
A State Level Task Force is being set up in each State to periodically review issues of supervisory and regulatory concerns in respect of CCBs and SCB.
The process of implementing the Revival Package in any state begins with the signing of the Memorandum of Understanding (MoU) among the GoI, the participating state government and NABARD. The common draft of the MoU was finalised by the NIMC, and decisions taken in the NIMC on policy or operational issues could either be incorporated in the MoU while executing it or could be incorporated suitably while making amendments to the various Acts, Rules, byelaws etc. without making any change in the MoU. State specific issues which are not common to other states and are not against the spirit of the MoU and the Revival Package may be incorporated in the MoU.
A special audit of all PACS, DCCBs and SCB in every participating state would be undertaken to arrive at a true and fair assessment of the amount of accumulated losses as on 31 March 2004 as also a fair and acceptable proportion of such losses on the basis of the origin of such losses, i.e., losses due to credit business, Public Distribution (PDS) business, or other trading business etc. Special audit formats, manual and FAQs on special audit of PACS & FAQs on special audit of CCBs have been designed by NABARD to facilitate this exercise. These special audits would be conducted either by the personnel from the cooperative audit department of the state or by selected outsourced auditors after being suitably trained on the guidelines for the conduct of special audits. In either case, the exercise will be test checked by a set of independent Chartered Accountants who are members on DLIC. Every participating state would also promulgate an Ordinance as per para 9 of the MoU to amend the State Cooperative Societies Act to give effect to the institutional and legal reforms envisaged in the Revival Package or would enact the necessary legislation.
Certain provisions are also being made within the NABARD Act to enable availability of NABARD refinance to a cooperative in any tier either directly or through any regulated FI.
The RBI has prescribed fit and proper criteria for election to the Boards of the rural cooperative banks along with criterion for professionalisation of the boards of these banks and CEOs of these banks.
As PACS across the country were using different accounting systems which did not present a true and fair picture of their financial status, a Common Accounting System (CAS) has been designed which will ensure transparency and application of prudent accounting methods and is also emendable to both manual and computerized environments. The system would generate necessary outputs for internal control and management decisions as well as meeting the supervisory and regulatory requirements and needs of other associated agencies. To the extent possible, this will be computerized even at PACS levels.
Training modules for training of the elected directors and staff of PACS have been designed by a dedicated working group set up by NABARD. The group is now designing programmes for the higher tiers of the CCS. |
