At Pre Budget meeting with Union Finance Minister Arun Jaitley, Prof Dr Uday Joshi, National General Secretary of Sahakar Bharati submitted a note urging concessions for urban co-op banks and credit societies in particular and for the co-operative sector in general.
Joshi said Sahakar Bharati is of the view that RBI should stop forcing or inducing Urban Co-operative Banks to convert themselves into private entities. He referred to the Gandhi Committee Report in which the RBI had stipulated that if UCBs needed capital it would have to change its character from co-op to commercial.
The matter had provoked intense debates when the Report had come. Former NAFCUB President Mukund Abhyankar had to lose his post as he was one of the members of the committee which had made this recommendation. “To give adequate powers to the RBI to more effectively regulate UCBs, the Banking Regulation Act be appropriately amended to protect the interest of Depositors” Sahakar Bharati note read.
Besides this, various other demands under the rubrics of Urban Co-op Banks, Fisheries co-operatives, Weavers Co-op societies, dairy co-ops, PACS, Agro-processing co-ops etc were raised.
The brief note also touched upon issues like Tax on dividend, Raising Capital by Cooperatives, Banking Regulation Act and problems of Cattle feed Manufacturing Units.
Talking of UCBs and Credit co-ops the note demanded that the ambit of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 be extended to the state registered co-op banks also. Presently, only Urban Co-Op Banks registered under the Multi-State Co-Op Society Act are eligible.
UCBs have been traditionally extending credit facilities to Micro & Small Enterprises but they are not allowed to avail the Credit Guarantee Fund Scheme. The anomaly must go, read the note.
It also demanded that the restrictions on UCBs lending Housing Loans to a large number of individual applicants must go especially when the Central Government aims to provide housing for all. “Separate guidelines for exposure to Commercial Real Estate may be issued by the RBI”, it added.
Sahakar Bharati also demanded that financially sound UCBs be permitted to open Sukanya Samridhi Account which was launched by the Government of India as a part of “Beti Bachao-Beti Padhao” (BBB) Initiative.
Well Managed UCBs be permitted to open Tax Saving Deposit Scheme and licences for opening new UCBs should be started. No licence for UCBs have not been issued for more than a decade while RBI has given the same to a variety of new banks, it noted.
It also gave a population-UCB ratio and compared Indian case with other countries. “Considering the continental size of the country, the present number of UCBs is too small when compared with the number of Co-op Banks in Austria (570), Finland (220), France (2500), & US (8400).
Considering the penetration of these banks in the unorganized sector and micro enterprises, it is necessary that Line of Credit be made available to them by Mudra Bank, it listed its demand. Collectively they have a network of over 50,000 branches while Mudra Bank extends Line of Credit to only 51 Scheduled UCBs as of now.
Sahakar Bharati also demanded that Well Managed Urban Co-Operative Banks be allowed to finance Primary Cooperative Societies engaged in Agro-Processing Activities relating to Cotton, Fruits & Vegetables, Fisheries, Sugar, Cattle-feed, etc. It asked for amendment in the Banking Regulation Act for the same.
It also listed the oft-repeated demand of restoring Section 80 P benefits to all UCBs. To buttress its argument, it said UCBs have no access to Capital Markets nor do they get any support from Central or State Govts; secondly as per World Organisation of Co Op Credit Union (WOCCU), 67% countries in Asia, 62% in Africa, 81% in Latin America, 94% in Caribbean and 38% in Europe do not tax Co Operatives.
The list also included long-pending demands of sectors like Fisheries Co-Operatives, Weavers’ Co-Operative Societies, Primary Agricultural Co-Op Societies, Dairy Co-Operative Societies and Agro-Processing Co-Operative Societies.
On the issue of Tax on Dividend it demanded exemption from Income Tax on Dividend paid by Co-Op Societies to its Shareholders.
Sahakar Baharati also said to raise capital for Co-Ops, guidelines be issued for Issuance and Rating of Irredeemable Bonds. So also, SEBI be advised to provide a Listing & Trading platform for such Bonds issued by the Co-Ops. Multistate Co-Op Act & State Co-Op Acts do not prohibit issuance of such Bonds & their Rating, it noted.
There is a need to review FSWM norms by RBI to manage current critical situations of raising NPAs