Against the backdrop of the 40th Foundation Day of NABARD, its chairman Dr. G R Chintala spoke to the Indian Express on the creation of new Ministry of Cooperatives, loan waivers in Maharashtra, the new farm laws, among other things.
NABARD is the governing institution of agricultural and rural banking in the country. With this background, what is your reaction to the formation of a new central ministry of cooperation? What should be the aim of this ministry?
This is indeed a welcome move. The cooperative movement has played a very important role in the nation. The country has 370 plus district central cooperative banks, 34 plus state cooperative banks and over 1 lakh primary agricultural cooperative societies (PACS), Cooperative institutions were supposed to be one-stop-shop for all credit and agricultural needs of the rural areas.
However, over the years the cooperative movement lost its vibrancy. There are many reasons for it, but we have seen their share in agricultural credit has been on the wane and now is around 12-13 per cent only. The new ministry, I hope will bring new vibrancy in the sector and bring them at far with international institutions. In countries like France, Germany cooperative institutions serve all the needs of the agricultural sector- from credit to marketing.
The new exclusive ministry, I hope will get back the vibrancy in the sector. What I hope is that the ministry would work to strengthen the PACS and try to convert some of them into multi-purpose cooperative societies. As NABARD we have handheld 35,000 PACS to upgrade them into multi-purpose societies offering a range of services to the farmers.
Other than rural credit, there are cooperatives in milk, sugar, and other sectors. But I feel most of them are running below efficiently. The new ministry, I hope will bring about a new lease of professionalism in them.
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You spoke about bringing professionalism to the cooperative sector. But when it comes to disbursal of the short duration crop loan, the cooperative banks seem to be doing better than commercial banks. In Maharashtra, the state government is planning to write to the Reserve Bank of India (RBI) to complain about commercial banks not disbursing loans to the farmers. What is your take on this?
We need to check disbursal at the national level- the commercial banks have a target of Rs 15.38 crores of which they have disbursed between 70-80 per cent. The cooperative banks have a lesser amount to disburse so their target achievement can be a bit easy.
However, the situation in Maharashtra is different. Since the last three years, when the announcement of loan waivers had come we have seen loan defaults and commercial banks are a bit wary of issuing new credit. Cooperative banks have their set format of credit disbursal so they can meet their targets well as they have good people connect. On their part, the local branch manager of the commercial bank changes every 2-3 years so they might not have the necessary connection.
When it comes to the district central or state cooperative banks, a major complaint they have is the stepmotherly treatment they get from the RBI. They are not allowed to open ATMs outside their branch premises. Has the NABARD taken up this issue with the RBI?
Yes, we agree to the constraints the banks face in some of their operations. We have asked the RBI to take up differential if not preferential treatment for this bank. Given the kind of services, they offer they should be allowed to have access to all kinds of services. As for ATMs, I feel digital money is taking up more importance than cash. We have earmarked funds for digital inclusion and products for the banks. I feel in the years to come, ATMs might become redundant and their place would be taken up digital products.
NABARD also is entrusted with hand-holding of Farmers Producers Companies (FPC)s. But on-field many FPCs say they face problems with working capital. What is the situation on the ground?
FPCs are also on the government’s priority list and the NABARD through its sister concern NABKISAN is working on them. We have set a target of setting up 5,000 FPCs of which 2,500 are in the investment category.
NABKISAN is the investment category and is working on them. The share capital infused in FPCs is between Rs 5- 3 crores and the work is going on.
What is your take on the farm laws and how will it help the FPCs?
Market relaxation has been on the agenda of various governments from 2003-04 and it has been achieved now. Now, both the PACS and the FPCs can act as marketplaces for farmers. Given the new opportunity allowed by the new laws, these village-level bodies can multi-function as marketplaces for their members. There is a lot of window for transformation under the new law for them.
In fact, we have seen many FPCs now operating as marketplaces, especially for onions. In the days to come, we feel the FPCs will develop as alternate markets. Farmers instead of going to the mandis would take their produce to these village-level bodies for selling.