Nagpur: State government has decided to merge loss-making district central cooperative banks (DCCBs) with Maharashtra State Cooperative Bank (MSCB) and has formed an eight-member committee for preparing the road map. The move is expected to benefit Nagpur DCCB, whose financial position is not good.

Political experts said that the decision was also aimed at weakening the hold of Congress and NCP over the state's cooperative sector. "Almost all the 31 DCCBs are controlled by politicians belonging to the two parties. Presently, MSCB is directly controlled by the state government through an administrator. Former chief minister Prithviraj Chavan had dismissed MSCB's board to weaken his deputy Ajit Pawar," an expert said.

The government resolution (GR) issued in this regard states that many DCCBs were not in a position to provide timely loan to farmers and hence it was necessary to merge them with MSCB. Nagpur DCCB had stopped lending to farmers for three years due to restrictions imposed by Reserve Bank of India (RBI). This year though it disbursed loans worth Rs33 crore.

As per the GR, the eight-member committee for DCCB merger will be headed by Yashwant Thorat, retired chairman of National Bank for Agriculture and Rural Development (NABARD). The other members are cooperation commissioner, chief general manager of NABARD, Pune, chairman of Maharashtra Urban Cooperative Banks Federation Limited (MUCBFL) and three others.

A cooperation official told TOI, "State government's decision notwithstanding, it may not be easy for it to make MSCB take over loss-making DCCBs. In May this year, the state's apex cooperative bank had rejected a government proposal to take over Wardha DCCB as it had 98% non-performing assets (NPAs)."

He further said, "MSCB officials also felt that if they agreed to the merger, the state government would have come up with similar proposals. Though Wardha DCCB was in the most critical condition, there were other loss-making DCCBs as well. There was also an issue of transfer of Wardha DCCB's employees to MSCB."

Maharashtra is India's leading state in terms of the network of the cooperatives and the penetration of cooperative banks. MSCB is an apex body for 31 DCCBs which have 3,746 branches, with a third tier of 21,085 primary agriculture credit societies (PACS) which directly lend to farmers and the rural population.

While this expansive cooperative network was created with good intentions, over a period of time, politicians controlling the banks indulged in worst kind of cronyism. Incompetent persons were appointed on critical posts and loans were given to ineligible persons. When politicians defaulted on huge loans no effort was made to recover them. This led to deterioration in condition of most banks. Nagpur DCCB went down due to questionable actions of Sunil Kedar, Congress MLA from Saoner.