The panel expressed concerns that primary agricultural credit cooperative societies and central cooperative banks were not performing their role and giving almost 40% of their loans for non-agricultural needs

Mumbai: The central cooperative banks should strive to have at least 70% of their loan portfolio for agriculture, reports PTI quoting a panel appointed by the Reserve Bank of India (RBI).

“The Committee... recommends that central cooperative banks (CCBs) should strive to provide at least 70% of their loan portfolio for agriculture. ...if a CCB or state cooperative bank (StCB) consistently under performs and provides less than 15% share of agricultural credit in the operational area, then that bank should be declared and treated as an urban co-operative bank,” the Expert Committee on Streamlining Short Term Co-operative Credit Structure said.

The panel expressed concerns that primary agricultural credit cooperative societies (PACS) and CCBs were not performing their role and giving almost 40% of their loans for non-agricultural needs.

It also said that “30 September 2013 be set as deadline for all StCBs and CCBs to be fully operational on CBS and providing RTGS, NEFT, ATM and POS device based services.”

Moreover, it recommended 31 March 2013 as a deadline for CCBs and StCBs to mobilise funds internally or externally to achieve 4% capital to risk (weighted) assets ratio (CRAR).

“...a large number of CCBs and some StCBs do not have adequate capital to meet even the relaxed licensing norm of 4% CRAR. The Committee recommends that 31 March 2013 may be set as the deadline for these banks to mobilise the required capital either internally or from any other external source so as to achieve 4% CRAR,” it said.

To mobilise funds it recommended that coopreative banks be allowed to issue fixed interest bearing deposits of 10 years or more with a lock-in period of five years and to treat such deposits as tier I capital.

The panel also said the Banking Regulation Act may be amended to give direct and overriding authority to the RBI for superseding the board or removing any director on the board of StCB or CCB.

It also said the government may consider giving income tax exemption to these entities up to 2016-17 for incentivising to achieve 9% CRAR. There should be graded CRAR norms for different business sizes, it added.

It estimated that about 58 CCBs would not be able to mobilise the required capital, or their business sizes are so small that they would not be sustainable in the long run and would have to be therefore consolidated with other CCBs.

The RBI had formed the committee in July 2012 under NABARD chairman Prakash Bakshi.