IMPACT OF REVIVAL PACKAGE ON SHORT TERM COOPERATIVE CREDIT STRUCTURE WITH REFERENCE TO TAMIL NADU
T. Paranjothi*
Abstract
The Government of Tamil Nadu signed the MoU in 2008 and the byelaws of the Primary Agricultural Credit Societies, District and State Cooperative Banks were amended in accordance with the circular issued by Registrar of Cooperative Societies. The assistance released was Rs.1342.15 crores and Rs. 728.74 crores was turned down by NABARD. A large number of societies were assisted in Salem, Madurai, Tiruchirapalli, Dharmapuri, Dindigul, and Villupuram District. As a result of the assistance their was substantial increase in the loans advanced and the number of viable societies. The assistance provided enabled the societies to under take other activities such as Agriclinic, Agro-Service and Common Service Center.
The Task Force on Revival of Rural Cooperative Credit was constituted under the Chairmanship of Prof. A. Vaidyanathan in February 2005. The Government of India announced the Revival Package in January 2006. The Task Force estimated losses of PACS at Rs. 4,595 crores, DCCBs at Rs. 4,401 crores. It noted that more than 50 per cent of PACS and one third of DCCBs reported losses. The Net Worth eroded in 20 per cent of SCBs and 38 per cent of DCCBs.
The main observation of the Task Force were:
Ø Deteriorating & weak financial position related to poor governance & management;
Ø Intrusive state patronage & politicization – government interference in the form of :
o supersession of boards;
o deputation of government officials to top management in banks;
o setting up common cadre for PACS;
o involvement in administrative & financial decisions;
o Government combining the role of share holders, manager, regulator, supervisor & creditor.
Ø In effect, cooperatives lost their right to self governance;
Ø Members had little or no stake in managing the affairs of cooperatives.
The main recommendations were:
v Financial assistance to wipe out accumulated losses – strengthen capital base;
v Institutional reforms–develop democratic, member centric/ driven, autonomous & self reliant institutions;
v Radical changes in legal frame work – ensure prudent financial management;
v Capacity development of personnel;
v Revival package.
------
Professor and HOC, Center for Research and Publications, Vaikunth Mehta National Institute of Cooperative Management, Pune 411 007 (The author acknowledges the support and guidance given by Shri Sivan Arul, Managing Director, Tamil Nadu State Coop. Bank Ltd., Mr. Rajkumar, Assistant Manager and Staff of Kancheepuram and Vellore District Central Cooperative Banks).
The essential elements of the Revival Package were:
§ Establishment of decision making NIMC, SLIC & DLIC – NABARD as implementing agency;
§ Voluntary participation of states – MoU – outlined responsibilities;
§ Special audit of all CCS institutions – to determine acc. losses;
§ Amendment of State Cooperative Acts, rules, bye-laws;
§ Election of Boards, induction of professional directors;
§ Ceiling on state equity at 25%;
§ Reducing State nomination in board of SCBs/DCCBs to one and removing nomination completely in PACS.
§ Conditional to legal & institutional reforms – one time financial assistance – to cover financial losses – bringing to a minimum CRAR of 7%;
§ Financial assistance to start from the bottom and move upwards;
§ Direct financial assistance to PACS with recovery of at least 30%;
§ Full recap assistance for PACS with recovery of 50% & more – step-wise recap in case of recovery of 30% - 50%;
§ CAS & computerization of PACS;
§ Training of PACS, CCB/SCB personnel, board directors
§ Total cost Rs.13596 crore to be shared in the ratio of 68:28:4 by Government of India, State Cooperative Bank and Cooperative Credit Structure respectively.
Many State Governments signed the MoU with Government of India and NABARD covering 96% of Short Term Cooperative Credit Societies units in the country. States amended the Act and Professional Directors are put in place as per Fit and Proper Criteria in State Cooperative Banks of 12 States. The CEOs of State Cooperative Banks in 13 states have been appointed as per fit and proper criteria. In the case of CCBs, 166 CCBs out of 322 CCBs in 15 states have appointed as per fit and proper criteria. Common Accounting System (CAS) for PACS was designed and manual on CAS was circulated by NABARD to Registrar of Cooperative Societies of all implementing states.
In respect of capacity building 9 modules were developed for the staff and board members of the short term cooperative credit structure. They are:
- Module I : Four-day training module for PACS secretaries on "How to do the existing business better in the post reform scenario" with specific thrust on resource mobilization, loan products, housekeeping and accounting.
- Module II: Two-day training module for board members of PACS focusing on self-sustenance through improved governance & management of resources.
- Module III: Two-day module for PACS secretaries focusing on CAS and MIS.
- Module IV: Two-day module on CAS & MIS for departmental auditors and supervisors of cooperative banks to enable them to provide handholding support to the PACS functionaries.
- Module V: Three-day training module for the elected board of directors of CCBs and SCBs with focus on the need for change and issues in governance in the post reform scenario.
- Module VI: Orientation programmes for CEOs of CCBs of 5 days to enable them to recognize the increased business opportunities in the changed scenario.
- Module VII: A three-day training module on Business Development Plans for PACS Secretaries.
- Module VIII: A five-day in-campus Orientation programme for Branch Managers and Senior Officers of CCBs/SCB for business development/diversification.
- Module IX : Three-day Orientation programme for Supervisors/ Inspectors of PACS.
A standardised set of MIS for PACS has been designed and circulated among RCS of implementing States to aid decision making at PACS and at all other levels including higher financing agencies, regulators and other agencies. A Handbook on MIS has also been issued. As mentioned above, apart from training the PACS functionaries under new CAS/MIS, Cooperative Auditors, Inspectors and Supervisors were also trained to support the PACS functionaries to adopt the new system.
A. Vaidyanathan in his paper 'Future of Cooperatives in India' presented at the International Conference 'Leveraging Cooperative Advantage' in November 2012 observed that "most states have signed the formal MOUs agreeing to make specified changes in the law and regulations. Audit of PAC accounts to determine the true extent of accumulated losses has been completed in some states and is in progress in others. Many, but not all, are reported to have made the recommended changes in law. The process of audit to determine the quantum of assistance is said to be complete. A large part of the assistance is also reported to have been released thereby enabling the PACs to revive their operations.
But subsequent events have thrown considerable doubts about the willingness to implement the reforms in letter and spirit. States' acceptance of reforms turns out to be more to prevent collapse of co-ops and get the central assistance for enabling them to resume lending than a genuine interest in implementing institutional reforms. Commitments agreed to by states in their formal MOUs have not been implemented fully, some not at all, and in several instances implemented in a diluted form. Implementation is tardy and there are instances of reverting to old ways after receiving financial assistance from the centre.
For instance in many cases elections are not held on schedule; they continue to be fought on party lines, legislation providing for alternative model co-ops and enabling PACs under existing to shift to the new mode has not been enacted, state governments stake in equity have not been reduced in many cases, audit continues to be with the department, its timeliness and quality remain a source of concern, co-op staff continue to be run by staff from the state cadre, state government, interference continues largely unabated".
Table 1 State-wise amount released under Revival Package
Sl / State / No. of PACS / GoI share / St. Govt. share / PAC shareto be brought in* / Total Recap
Assistance / PACS share
brought in
1 / Andhra Pradesh / 2580 / 1589.67 / 215.98 / 166.91 / 1972.56
2 / Assam / 368 / 43.63 / 6.43 / 7.85 / 57.91
3 / Bihar# / 6633 / 265.06 / 24.12 / 74.06 / 363.24
4 / Chhattisgarh / 933 / 162.69 / 25.97 / 64.88 / 253.54
5 / Gujarat / 2330 / 333.47 / 27.33 / 25.00 / 385.80 / 13.13
6 / Haryana / 547 / 470.50 / 22.13 / 34.13 / 526.76 / 2.92
7 / Karnataka ** / 4249 / 555.67 / 86.73 / 69.18 / 711.58
8 / Madhya Pr. / 3134 / 985.09 / 69.92 / 106.12 / 1161.13
9 / Maharashtra / 14769 / 1284.19 / 32.26 / 260.41 / 1576.86
10 / Meghalaya / 179 / 10.69 / 1.19 / 0.19 / 12.07
11 / Orissa / 2528 / 594.69 / 67.54 / 49.04 / 711.27
12 / Rajasthan / 3275 / 318.02 / 13.05 / 48.89 / 379.96 / 5.17
13 / Sikkim / 135 / 1.64 / 0.18 / 0.07 / 1.89
14 / Tamil Nadu $$ / 3355 / 1078.84 / 147.58 / 157.05 / 1383.47 / 110.21
15 / Tripura / 261 / 69.17 / 7.71 / 2.11 / 78.99
16 / Uttar Pradesh / 4689 / 623.41 / 61.19 / 440.51 / 1125.11 / 5.70
17 / West Bengal / 2937 / 134.97 / 15.59 / 11.67 / 162.23
Total / 52902 / 8521.40 / 824.90 / 1518.07 / 10864.37 / 137.13
#PACSReorganised after conduct of spl. Audit *PACS given two years time to bring in their share also, PACs share includes share of ineligible PACS which may not be brought in.
**Refund of0.87 crore received from Belgaum CCB $$ Refund of0.49crore received from Ramnad CCB &0.07 crore from Tirunelveli CCB through TNSCB
Table 1 furnishes the state-wise assistance provided under the revival package. The total assistance provided to 52902 PACS was Rs. 10864.37 crores. The amount of assistance was very high for Andhra Pradesh, Madhya Pradesh, Maharashtra, Tamil Nadu and Uttar Pradesh. The assistance was the lowest in Meghalaya and Sikkim. In North eastern sector Tripura availed 78.99 crores as assistance.
The Government of Tamil Nadu signed the MoU on 3/1/2008. The bye-laws of the Apex Bank, District Central Cooperative Banks, and Primary Agriculture Cooperative Societies have been amended as per the conditions under revival package. The Registrar of Cooperative Societies, Government of Tamil Nadu has issued circular to the effect that the bye-law has to be amended. The Primary Agricultural Cooperative Credit Societies in Tamil Nadu have uniformly amended the bye laws as suggested by Registrar of Cooperative Societies. 66 Primary Agricultural Cooperative Credit Societies were identified as ineligible under the revival package since these PACS have not reached the recover percentage of 50 and above as on 30/6/2007. The Apex Bank and its branches, District Central Cooperative Banks and its branches are under Core Banking Solutions (CBS).
In Tamil Nadu, the software developed by Onward eServices is being rolled out. M/s Onward eServices and M/s Wipro Infotech have been identified through tendering process for rolling out the software and providing training to the PACS staff. Of the 1663 PACS that have been identified in the first phase for computerisation, roll out is in progress in 1547 PACS of which 1144 PACS have been brought online. 3055 PACS that have been identified in the second phase for computerisation, data creation completed in 1352PACS & 302PACS have been brought online.
During the field visit it was observed that PACS are in the process of computerisation. It is noted that the computer literacy of the personnel at the PACS level is not encouraging. This points out the need for computerisation training programme on a massive scale so that they are able to use the computer effectively. Similar is the case with the common accounting system though the Apex bank as well as Registrar of Cooperative Societies have issued the registers and formats designed by NABARD under CAS/MIS visible progress is not notice. This can happened when the societies go online completely.
Table 2 Amount sanctioned and released under Revival Package in Tamil Nadu
(Rs. in crores)
Category of PACCS / No. of PACCS / GoI share / GoTN share / PACCS share / TotalA / Sanctioned / 2230 / 546.33 / 73.52 / 106.89 / 726.74
Released / 2199 / 527.67 / 2230 / 73.52 / 601.19
B1 / Sanctioned / 529 / 188.24 / 25.11 / 23.47 / 236.82
Released / 526 / 187.14 / 529 / 25.11 / 212.25
B2 / Sanctioned / 310 / 118.01 / 20.72 / 17.71 / 156.44
Released / 293 / 110.01 / 310 / 20.72 / 130.73
Total - B / Sanctioned / 839 / 306.25 / 45.83 / 41.18 / 393.26
Released / 819 / 297.15 / 839 / 45.83 / 342.98
C1 / Sanctioned / 681 / 383.88 / 67.51 / 44.25 / 495.64
Released / 337 / 254.02 / 681 / 67.51 / 321.53
C2 / Sanctioned / 724 / 299.36 / 76.35 / 79.54 / 455.25
Released / - / - / 724 / 76.35 / 76.35
Total - C / Sanctioned / 1405 / 683.24 / 143.86 / 123.79 / 950.89
Released / 337 / 254.02 / 1405 / 143.86 / 397.88
Grand Total (A+B+C) / Sanctioned / 4474 / 1535.82 / 263.21 / 271.86 / 2070.89
Released / 3355 / 1078.84 / 4474 / 263.21 / 1342.05
A – Recovery percentage above 50 as on 30.6.2004
B1 - Recovery percentage between 30 and 50 as on 30.6.2004, above 50 as on 30.6.2006
B2 - Recovery percentage between 30 and 50 as on 30.6.2004, above 50 as on 30.6.2007
C1 - Recovery percentage less than 30 as on 30.6.2004, above 50 as on 30.6.2006
C2 - Recovery percentage less than 30 as on 30.6.2004, above 50 as on 30.6.2007
In Tamil Nadu the societies were categorized into A, B1, B2, C1 and C2 deviating from the All- India pattern of A,B, C as recommended by the Task Force. The total number of societies sanctioned assistance was 4474 but assistance was released to 3355 societies. The total assistance sanctioned was 2070.89 crores while Rs. 1342.15 was released. The remaining amount was turned down by NABARD even though the State Government is pursuing it with NABARD (Table 2).