Mohinder Verma
JAMMU, June 30: As sword of losing banking character has been looming large over three ailing Cooperative Banks, the State Government has decided to vociferously project the requirement of financial assistance before the Deputy Chairman of the Planning Commission of India during the forthcoming Annual Plan finalization meeting in order to bail out these banks of the crisis.
Official sources told EXCELSIOR that as no viable option could be found till date to bring Jammu Central Cooperative Bank, Anantnag Central Cooperative Bank and Baramulla Central Cooperative Bank out of the red, Chief Minister, Omar Abdullah and Minister of State for Cooperatives, Dr Manohar Lal Sharma, have decided to seek financial assistance from the Deputy Chairman, Planning Commission of India, Montek Singh Ahluwalia during the forthcoming Annual Plan finalization meeting.
Commissioner Secretary Cooperatives, Mohd Afzal Bhat and Chief General Manager of NABARD, J&K, Dr B D Mukhopadhyay, who is strong votary of extending help in early bailing out these banks of the financial crisis, will accompany the Chief Minister and Minister of State for Cooperatives. The NABARD is the monitoring agency for recapitalization of the banks.
Sources disclosed that Jammu and Kashmir would lay stress on the Planning Commission’s Deputy Chairman to either sanction soft loan to meet the financial implications involved in the recapitalization of the ailing cooperative banks or grant a suitable package as the State has no resources to meet the burden in this regard.
“This issue has already been taken up with the Union Finance Minister, P Chidambaram by the Chief Minister, Omar Abdullah so that these Cooperative Banks don’t lose their banking character for want of cleansing their balance sheets and recapitalization, which are imperative for getting the license to work as banks from the Reserve Bank of India”, sources said while expressing optimism about some sort of assistance from the Planning Commission and Finance Ministry.
In case of losing banking character, these institutions would only be able to work as Cooperative Credit Society and no transaction whatsoever in the form of banking could take place.
It is worthwhile to mention here that as a part of Government of India’s initiative of recapitalization of the week Cooperative Banks across the country, a committee headed by Prof Vaidyanathan was constituted to suggest ways and means for the accomplishment of this task. The Committee submitted its report along with a set of recommendations for the Central Government, State Governments, NABARD, RBI and the concerned Banks.
As per the recommendations of the committee, a Memorandum of Understanding (MoU) was signed between Government of India, NABARD and the State Government on April 7, 2008 by virtue of which these three banks had to pay their prescribed shares so as to cleanse their balance sheets and get recapitalized for getting the license to work as banks. Subsequently, pattern of share was apportioned for various stakeholders. However, owing to financial implications the objective could not be achieved in respect of these three banks till date.
As per the Action Plan chalked out for Anantnag Central Cooperative Bank in consultation with the Reserve Bank of India, an amount of Rs 98.86 crore is required to achieve the target of 4% Capital Adequacy Ratio (CAR) fixed by the RBI.
Similarly, in case of Baramulla Central Cooperative Bank, an amount of Rs 26.43 crore is required to bail the bank out of red. The Jammu Central Cooperative Bank requires Rs 187 crore to attain the 4% Capital Adequacy Ratio.
According to the sources, financial crisis in these three Central Cooperative Banks was the outcome of mismanagement in terms of manpower planning, indiscriminate branch opening resulting in increased establishment expenses without corresponding increase in business operations and poor recovery. Moreover, the cost of management was much higher than the acceptable level of less than 2% of the working fund and the investment portfolio was not managed professionally resulting into less return.
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