Kerala: Thrust on dealing with farm cooperatives

THIRUVANANTHAPURAM: Now that it is clear that the Centre will not reverse its decision on the cooperative sector, the Committee formed by the Planning Board to study the impact of demonetisation has recommended a slew of measures to bring the cooperative sector in the state back to life. Goading public sector entities and Government agencies to bank with primary agricultural credit societies (PACS) is an important strategy put forward by the Committee.

“This could send out a message that PACS are trusted entities with Government backing,” the report said. It also wanted the state to urgently pay up the dues to PACS, such as payments to compensate for loan waivers provided as part of past Government programmes. “These should be immediately cleared so as to give the concerned PACS financial support that is legitimately due to them,” the report said. In addition, the Committee also recommended schemes to provide some subvention of interest rates for borrowers who had a good debt servicing record.

The Committee felt that such a move could enthuse members to continue their association with the cooperatives. These initiatives from outside the cooperative sector, the Committee said, should be accompanied by internal measures by cooperative credit organisations at the local level to strengthen their institutional basis. “Technological modernisation should be accompanied by an effort to go beyond adopting core-banking solutions among branches belonging to individual cooperative credit societies,” the report said. Shifts to technological solutions that allow all PACS and their branches to be connected and networked and link that network to the larger world of the scheduled commercial banks are needed, it said.

It also wanted the state to consider the possibility of providing a Government guarantee for transfers. “If there is a fear that some PACS are likely to fail because they are unable to undertake business and could face a run in the form of transfers to accounts held by members in commercial banks and elsewhere, counter-parties may be unwilling to accept promises of payment through transfers, especially from those PACS that have not adopted electronic banking solutions,” the report said.