A day after Chief Minister Mamata Banerjee declared that cooperative societies were not empowered to attach the property of farmers failing to repay a loan, the West Bengal State Cooperative Bank raised concerns over a possible accretion in bad debts.
Yesterday Banerjee proposed an amendment to the West Bengal Cooperative Societies (Amendment) Bill, 2011, replacing provisions brought about by the Left Front government in 2006. The chief minister had said that under the amended Act, cooperative societies were not empowered to attach the property of any farmer who fails to repay a loan.
In West Bengal, there were more than 6,000 primary agriculture cooperative societies (PACS) which accounted for about 35 per cent of agriculture loans in the state, said Ashok Bandhopadhyay, chairman, West Bengal State Cooperative Bank.
The cooperative banks get about 50 per cent of their loans from the National Bank for Agriculture and Rural Development (Nabard), with the rest being mobilised from depositors.
“The impact of the move will be very detrimental. The cooperative banks borrow money either Nabard or depositors. However, if the banks do not get their money back, they would default to their depositors as well as Nabard,” said Bandhopadhyay.
West Bengal State Cooperative Bank has also written letters to the chief minister and the state level banking committee (SLBC), West Bengal to withdraw the amendment.
“If the mortgaging system crumbles it will endanger the entire lending system, particularly the small and marginal farmers, which may help moneylenders and non-government organisations, who offer loans with annual rate of interest to the tune of 25-30 per cent,” said Bandhopadhyay.
About 84 per cent of loanee members of cooperative societies are small and marginal farmers. Recovery for agriculture loans by the societies is about 78 per cent.
This year, it is expected that about Rs 6,000 crore would be disbursed through the cooperative system in West Bengal, against Rs 4,000 crore last year.
Of this the share of agriculture loans last year was about Rs 1,400 crore, against Rs 1,800 crore this financial year.
“If the system of selling of hypothesised property of willful defaulter, who do not repay not due to financial constraint, breaks down, the recovery and recycling of loan may be at doldrums,” said Bandhopadhyay.
