Primary Co-Op Banks Allowed To Lend For Agricultural Activities

The Reserve Bank of India (RBI) has permitted primary co-operative banks to extend finance for agricultural activities.

The central bank has recently sent a communication in this regard to all primary urban co-operative banks.

A number of these urban cooperative banks located in district towns had made representations to the apex bank seeking its permission to lend for agricultural activities.

In Maharashtra, there are a number of primary co-operative banks located in the rural districts.

The agricultural activities for which finance can be extended include poultry farming, short-term crop loans and financing surface irrigation.

The central bank circular states: Consequent upon our decision to allow the primary co-operative banks to extend their area of operation to the entire district of registration, we have reviewed the existing policy and it has been decided to permit primary co-operative banks to finance agricultural activities subject to certain conditions.

 

The central bank has stated that there are a number of conditions under which the primary co-perative banks would be allowed to finance agricultural activities.

First, the primary co-operative banks would provide direct finance only to members (no nominal members) and not through any agency like primary agricultural credit societies and primary land development banks etc.

Second, the communication states that the credit should be extended only after obtaining no dues certificate from the existing credit agencies in the area.

Third, the primary co-operative banks should follow the scales of finance and obtain security as per the guidelines issued by the Reserve Bank of India/National Bank for Agriculture and Rural Development (Nabard).

The circular also states that no refinance from the National Bank for Agriculture and Rural Development will be made available to the co-operative banks extending this finance for agricultural activities. At present, Nabard refinances scheduled commercial banks and regional rural banks investments in agricultural activities.

However, sources stated that since the primary co-operative banks had asked the central bank for lending towards agriculture based on their own resources, Nabard would not be refinancing them. The loans will be reckoned as priority sector advances, the central bank circular clarifies.