Rs 15,000 cr package likely for co-op banks

RUN-UP TO THE BUDGET

Move aimed to revitalise credit flow in the rural sector.

The Centre is planning to announce a Rs 15,000 crore bailout package for co-operative banks to revitalise credit flow in the rural sector.

The package is likely to be extended in the form of a cash assistance, instead of the norm of issuing bonds.

While the Centre is expected to provide 60 per cent of the assistance in revitalising co-operative banks, the states would be required to chip in with the remaining contribution, senior government officials told Business Standard.

The officials said the assistance would be linked to certain milestones and the Centre would provide the funds only after the state concerned made the necessary budgetary provisions. The entire Rs 15,000 crore assistance may not be made available in one tranche.

The move is in addition to the amendments to the Banking Regulation Act to end the system of dual control over the co-operative banks.

"We do not want a repeat of a situation like the Madhavpura or Charminar co-operative banks and steps are required to strengthen the financial position of the co-operatives for the rural credit sector to grow," an official said.

He said at the same time, the Centre did not want a wastage of funds. He said a Rs 10,000 crore package had been made available for co-operative banks in the 1990s, but without any strings attached, the credit system had hardly improved.

The scheme would be in line with the National Democratic Alliance government's package for the co-operative sector in which Rs 800 crore was earmarked in this year's interim Budget.

The then finance minister had also announced a Rs 15,000 crore package but the scheme did not take off.