Notes ban impact: DCCBs in Maharashtra achieve 8.9% of their rabi lending target
In Maharashtra, 31 district central co-operative banks, or DCCBs, account for a third of the total agriculture credit target in the kharif and rabi seasons
Mumbai: Maharashtra’s district central co-operative banks (DCCBs) have so far lent less than 9% of their rabi season crop loan target of Rs4,435 crore, a top official at the state’s apex cooperative bank said. The low outgo is attributed to cash shortage at the DCCBs due to demonetisation and a drop in the recovery of kharif season loans.
In Maharashtra, 31 DCCBs, through their network of more than 3,700 branches and 21,000 primary agriculture credit societies, account for a third of the total agriculture credit target in the kharif and rabi seasons. Public and private sector banks account for the rest.
Pramod Karnad, managing director of Maharashtra State Co-operative Bank (MSCB), the apex bank in the state’s three-tier co-operative banking structure, said the DCCBs have been able to lend only Rs396 crore so far. “Demonetisation could be one of the reasons for low disbursement of Rabi credit. Post-demonetisation, the DCCBs faced a situation of liquidity crunch. I do not have the comparative figures but the rabi credit disbursement by DCCBs this year is less than the target achieved last year in the corresponding period. The other reason could be low recovery of kharif loans by the DCCBs which compounded their problem of limited liquidity," Karnad said.
He, however, expressed confidence that DCCBs would meet their rabi credit target of Rs4,435 crore by 31 March, once the impact of demonetisation ebbs.
Co-operative sector experts, various state governments including Maharashtra, banking officials, and politicians have pointed to the impact of demonetisation on around 370 DCCBs across the country.
Between 11 and 14 November, the Reserve Bank of India issued circulars restraining DCCBs from accepting the de-legalized currency notes of Rs500 and Rs1,000. Karnad said the RBI has not specified any reason in its circular for not allowing the DCCBs from accepting old notes. Several DCCBs challenged this ban in various courts including the Supreme Court and all these petitions have been clubbed together.
One of the petitioners representing a DCCB in Maharashtra said on condition of anonymity that before the RBI issued instructions banning DCCBs from accepting old notes, these banks across the country had collected around Rs8,000 crore in demonetised notes. M.L. Sukhdeve, chairman of MSCB, says 31 DCCBs in Maharashtra alone had collected Rs3,500-4,000 crore. MSCB managing director Karnad said the SC had now asked the National Bank for Agriculture and Rural Development (NABARD) to audit all these deposits before they could be allowed to be exchanged with new currency notes. “No deadline has been set to complete this audit," Karnad said.
The petitioner quoted above said this would further impact the “already weak" liquidity situation of DCCBs. “Fresh currency is not being released to co-operative banks as per the rabi season requirement. If the deposits that we have collected through old notes are allowed to be exchanged with new currency, it would improve the liquidity situation," said the DCCB chairman.
Charudatta Arkatkar, deputy general manager of Bank of Maharashtra and secretary of the State Level Bankers’ Committee, a representative body of all formal lending institutions, said Maharashtra has a rabi season credit target of Rs13,558 crore. Of this, the public and private sector banks have a target of Rs8,473 crore. “Till November end, public and private sector banks had disbursed 16% of their rabi season target. Demonetisation has made some impact on the lending capacity," Arkatkar said.
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