Move to end dual control of co-op banks

By Our Special Correspondent

NEW DELHI, AUG. 24. With the scams involving cooperative banks growing by the day, the Centre and the State governments are all set to consider a new proposal tomorrow to end duality of control over cooperative institutions, especially the banking institutions.

This subject will form one of the core issues to be discussed during a meeting organised here tomorrow between all chief ministers and the Union Finance Ministry to discuss the recommendations of the taskforce on cooperative credit systems and the Rural Infrastructure Development Fund. The meeting will be inaugurated by the Prime Minister, Mr. Atal Behari Vajpayee, and the Central team will include the Union Finance Minister, Mr. Yashwant Sinha, the Union Agriculture Minister, Mr. Ajit Singh, the Deputy Chairman of the Planning Commission, Mr. K. C. Pant, and Member Planning Commission, Mr. Sompal.

According to the agenda paper for the conference, the taskforce on cooperative credit systems had recommended that banking functions by cooperative institutions should be brought completely under the Banking Regulation Act to be regulated by the Reserve Bank of India (RBI) only. As of now, the cooperative banks are regulated by the State Government concerned, the RBI, the National Bank for Agriculture and Rural Development (NABARD) and other apex banks or cooperative institutions. This arrangement has led to duality of control between the State governments on the one hand and RBI-NABARD on the other, resulting in cross-directives, adversely affecting the working of the cooperative banks. Consequently, the taskforce had suggested that the Banking Regulation Act of 1949 should override the provisions of the State Act or bye-laws and rules which run counter to it.

It has also been brought out that a large number of cooperative institutions had been accepting sizable deposits from non-members and in some of the States they have been using the word `bank' as part of their name, giving an impression to public that keeping deposits with them was as safe as keeping deposits with other banks.

The taskforce has, therefore, recommended that the Banking Regulation Act, by a suitable amendment, should explicitly prohibit these institutions from using the word `bank' as part of their name. Stringent penalties should also be prescribed for violating these provisions, is the recommendation which is likely to be deliberated upon tomorrow.

Another point likely to be pressed by the Centre is that the State governments should impress upon the cooperative credit institutions that there is need for periodical review of interest rates offered by cooperatives so as to be in line with the market trends. Also, the cooperative institutions should be allowed to diversify their activities so as to take up new activities of viable business, the task force has recommended.

Tomorrow's meeting is also scheduled to discuss the current status of the Rural Infrastructure Development Fund (RIDF) for which the total corpus has gone up to Rs. 23,000 crores while the amount sanctioned is Rs. 19,593 crores.

The problems that are likely to come up for discussion include the delays in terms of land acquisition, payment of compensation, resettlement, obtaining forest and environmental clearances and the like.

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