The Telegraph
Since 1st March, 1999
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Co-ops get cash & nudge

New Delhi, Dec. 16: The Centre today threw a Rs 13,596-crore lifeline at rural credit co-operatives as part of a larger package that also aims to make them more autonomous and professionally managed. Delhi will pick up a Rs 9,000-crore tab, while states will chip in with the rest over four years.

Under the scheme, states will have no nominees on the board of primary agricultural credit societies (PACS), a measure seen by experts as an attempt to eliminate political interference in the operation of these entities.

The package, designed to help short-term rural co-operatives wipe off accumulated losses and other dues, seeks to increase their capital to risk weighted assets ratio (CRAR) to at least 7 per cent. This means primary credit societies ' the lowest units in the chain ' can turn around and still maintain a healthy reserve of assets.

The capital adequacy ratio for PACs will be raised to 9 per cent within three years. Central co-operative banks (DCCBs) in districts and state co-operative banks (SCBs) will, however, have to comply with norms prescribed by the Reserve Bank. The revival of rural cooperative credit structure is critical as the UPA government has set a target of doubling the flow of institutional loans to agriculture within a period of three years.

The new norms set out in the package cap states’ equity share at 25 per cent. Holdings above this limit shall be converted into grants to co-operative societies.

The financial assistance, to which the Centre will contribute 68 per cent, states 28 per cent and central co-operative credit societies 4 per cent, is a one-time move. It does not include writing off loans yet to be repaid by farmers. “Co-operatives will have to continue to make efforts to recover these loans,” the official statement said.

Primary societies that recovered at least 30 per cent of their loans on June 30, 2004 will be eligible for assistance; those with 50 per cent ratios will receive full capitalisation. Societies with recoveries of 30-50 per cent will receive the assistance in three annual instalments, but they will have to improve their record by 10 per cent or more.

The bailout-to-recovery link will continue till primary societies achieve an aggregate rate of 50 per cent. Once they make the cut, they will receive the entire aid in a single tranche.

Drugs Act

The cabinet has decided to introduce a bill repealing the Drugs (Control) Act. It has also decided to amend the Competition Act, 2002 and repeal the excise duties (electricity) bill.

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