These banks being key pillar of the farm lending sector, 100,000 farmers may be affected this year
Nagpur’s District Central Cooperative Bank (DCCB) may be in liquidation soon if a submission by the Reserve Bank of India (RBI) to the Nagpur bench of the Mumbai High Court is accepted. For the time being, the high court has stayed RBI’s orders aimed at stopping operations of three DCCBs in the state.
The bank has alleged that the DCCBs in Nagpur, Wardha and Buldhana have not shown any signs of improvement despite being given a considerable time to show results. The RBI has also asked the three cooperative banks to stop accepting fresh deposits with effect from May 9. Even the Rs 250-crore bailout package, recently offered by the Maharashtra government, has failed to move the apex bank from taking this decision.
Farmers, the biggest sufferers
If the DCCBs are dissolved, farmers will bear maximum burden as they will be unable to access security-free loans. As of now, almost 70 per cent of farmers in the above-mentioned districts rely on DCCBs to get agricultural loans. This kharif season, about 100,000 farmers are expected to be affected by the non-functioning of the DCCBs. A second section of the society to bear the brunt of the decision would be government employees like teachers whose salaries are routed through these cooperative banks.
Small depositors safe, assures RBI
In his submission, the RBI assistant general manager for rural planning and credit department (RPCD), D B V Raju, has stated that the DCCB in Nagpur is in no condition to pay its creditors, both present and future. Therefore, allowing the banks to function in such a condition would be to needlessly jeopardise those placing deposits in the banks. The submission explains that the banking licence applications, submitted by these banks, have been rejected by RBI taking consideration the precarious financial condition of the three banks.
The submission, however, also says that interests of depositors will not be affected in case of liquidation, as around 98 per cent account-holders are small-time depositors whose money can be refunded under the Deposit Insurance and Credit Guarantee (DICG) provisions, which assure a refund upto Rs 1 lakh to all depositors.
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