The National Cooperative Union of India has expressed concerns over RBI's move to put cooperative sector lending institutions under a mandatory licensing regime.
"The move is not in the right direction and it is against cooperative movement's interest," apex body of cooperative institutions National Cooperative Union of India (NCUI) President Ghanshyam Bhai H Amin said. "For the last 40-50 years, cooperative banks were running without licence and RBI did not have any problem, but now it has changed its view," he said.
The Reserve Bank of India (RBI) in its annual policy statement 2009-10 has made it mandatory for cooperative banks to obtain licence by 2012.
The central bank plans to draw a roadmap for achieving the objective in a non-disruptive manner in consultation with the National Bank for Agriculture and Rural Development (NABARD).
Several cooperative banks are in a weak position as many farmers hit by flood and drought are not in a position to repay loan instalments. But RBI has its own line of thinking, he said. "Possibly, they are willing to close down the small cooperative banks," Amin said.
Amin said that due to frequent changing of rules by RBI, cooperative banks are facing difficulties. Earlier, after non-payment of installments for one year, the money was considered as non-performing asset (NPA).
Later, the time period was reduced to six months and after that three months. Due to such changes, cooperative banks have to earmark more money for NPA and this reflects badly on their profit and loss account. "The loss of cooperative banks is not real, it is created due to policies of RBI," Amin said.
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NCUI President said that as far as number of loan beneficiaries are concerned, cooperative banks are ahead of commercial banks. Most of the small farmers are dependent on coopertaive banks for their loan requirement.
He asked for speedy implementation of A Vaidyanathan Committee's recommendations on cooperative banks re-capitalisation.
As indicated in the annual policy statement of April 2008, the Government approved a package for revival of the short term rural cooperative credit structure based on the recommendations.
An aggregate amount of Rs 4,740 crore has been released by the NABARD as the Government of India's share for recapitalisation of primary agricultural credit societies in eight states as on February 28, 2009.