Cooperative banks today demanded a reduction in interest on refinance and assistance of Rs 8,000 crore in order to revitalise them and reduce the cost of credit to the farmers. They have also expressed displeasure over the proposed delayering of the cooperative banks structure which, according to them, would not serve any purpose.
"National Bank for Agriculture and Rural Development (Nabard) must reduce the interest rates at which they finance the cooperative banks so as to ensure they have a level playing field vis-a-vis the commercial banks," T D Janardhan Rao chairman of National Cooperative Agriculture and Rural Development Banks' Federation told reporters here.
He said Nabard was getting credit from the Reserve Bank of India (RBI) at a flat rate of 5.5 per cent but was disbursing it to the cooperative banks at different slabs of 5.5-8 per cent based on the dependency of the respective states.
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Rao pointed out that while the bank rate had been reduced to 7 per cent from 12 per cent over the years, Nabard had not reduced the interest on refinance, placing the cooperative banks at a disadvantage against the commercial banks.
He said the average cost of finance for commercial banks was 6-7 per cent compared with 9 per cent for cooperative credit banks. Though 50 per cent of the rural credit was being provided by cooperatives but they got only 5 per cent of the deposits, he said.
Seeking Rs 8,000 crore for recapitalisation of cooperative banks in line with a Rs 24,000 crore bail-out package for commercial banks, he said a decision on the issue must be taken forthwith as further delay would only aggravate the problem.