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Parliamentary Consultative Committee attached to Ministry of Finance in its meeting held here today endorsed the Report of the Task Force appointed to recommend an action plan for reviving the rural cooperative banking institutions in the country. Finance Minister Shri P. Chidambaram while addressing the meeting termed the report as one of the most seminal documents and opined that, if implemented, it will bring about dramatic improvement in functioning and viability of credit institutions in the rural sector.
Stating that the cooperative sector is in a shambles, Shri Chidambaram appealed to the members to convince the state political leaderships, especially the incumbent Chief Minister, to accept the recommendations of the Vaidyanathan Committee Report to revamp the entire credit cooperative structure in the country. He said that all political parties should support implementation of these recommendations. He said like earlier committees, this Task Force also feels that any financial restructuring without addressing the root causes of the weaknesses of the cooperatives by bringing about structural reforms would not result in a sustained revival of the system. The financial restructuring will also not be effective without specific legal measures for enabling cooperatives to evolve into democratic, self-governing and financially well-managed institutions. The Task Force has, therefore, recommended that the approach for financial restructuring should be contingent on commitment to and implementation of legal and institutional reforms. The recommendations envisage a bottom up approach in as much as without strong Primary Agricultural Co-operative societies (PACS), the superstructure cannot become and remain strong. The major aspects of the financial restructuring include criteria for determining the eligible purposes and institutions, quantum of assistance required, pattern of sharing the liability, conditionalities attached and the time frame.
Shri Chidambaram stated that he would convene a meeting of the Chief Ministers and would like to hold a full-day discussion with them, preferably in May 2005 and if the States are ready to accept the conditionalities for bringing about the legal, administrative and structural changes and to participate in the scheme and share its financial liabilities, financial assistance would be released linked to the conditionalities attached to it.
Speaking on the revival package, the Finance Minister stated that as part of the financial restructuring, assistance would be available for wiping out accumulated losses, covering invoked but unpaid guarantees given by the state governments, increasing the state capital to a specified minimum level, retiring government share capital and technical assistance.
Several suggestions were put forward by the Members at the meeting which include, 1) RBI should not be the supervising/inspecting authority to monitor the implementation. It should only lay down prudential norms. 2.) There should be another body at state level to handle this work. 3) Rural credit delivery system should be improved. 4) The Task Force should also consult MPs who know the ground realities. 5)The reform experiment should be done on select cooperatives as models first and then extrapolated to other banks. 6) There should be another task force to go into much needed structural reforms. 7) The cooperative societies should get loans directly from NABARD/public sector banks/state banks and not through district level banks. 8) The election system for the cooperative societies and banks should also be improved and the term of office bearers should be fixed. 9) Meeting of the Chief Ministers and Cooperative Ministers of the states should be called for obtaining political commitment on implementing the recommendations. 10) There should be competition among rural banks on the special incentives to be given to farmers on regular and timely repayments. 12) Clearance of loans should be fast and disbursements done in time. 13) Loans should also be given for purchase of land to agricultural and landless labourers.
Minister of State for Finance, Shri S. S. Palanimanickam and senior officials of the Finance Ministry were present. Among the members who attended the meeting include S/Shri L. Rajagopal, Bimal Jalan, R. Prabhu, Rameshwar Oraon, Jivabhai A. Patel, M. Sreenivasulu Reddy, Prahlad Joshi, Vijaya Kumar Khandelwal, Angadi Suresh Chanabasappa, Dr. C. Krishnan, Mohammad Salim, Narendra Kumar Kushwaha, Tukaram G. Gadakh, P.C. Thomas, D.K. Adikesavulu, Mohan Rawale, Murli Deora, Jairam Ramesh, Ravi Shankar Prasad, S.S. Ahluwalia, Rajkumar Dhoot, A. Vijayaraghavan and S.M. Lajan Basha.
BSC/DT/GN/CS-170/05
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