Government to revive District Central Cooperative Banks (DCCBs) in four states

November 6, 2014

The NDA Government has decided to launch scheme in order to infuse Rs 2,375.42 crore to revive 23 District Central Cooperative Banks (DCCBs) in 4 states, which were on the verge of closure.
Of the total amount, state governments will contribute Rs. 1,464.59 crore, Centre Rs. 673.29 crore and NABARD Rs. 237.54 crore.

Why Government want to save these DCCBs?

There are 23 unlicenced DCCBs at district in four states. Among 23 unlicenced DCCBs, 16 are in Uttar Pradesh, 3 each in Jammu and Kashmir and Maharashtra and 1 in West Bengal.
These banks were on the verge of closure.
They have deposits base of about Rs 6,839 crore and loan book of around Rs 3,774 crore.
These deposits are of People from lower strata of society and small businessmen.
So, in order to protect interest of these people, government is planning to stop them from verge of closure.

How will government infuse this amount?

For the purpose of implementation of the scheme, a tripartite agreement in the form of Memorandum of Understanding (MoU), stipulating conditionalities and deliverables, will be signed between the Centre and state and NABARD.
Centre’s share of Rs 673.29 crore would be released through NABARD as interest-free loan and would be converted into grant on fulfilment of conditionalities/deliverables outlined in the scheme.

Conditionalities are:

Bringing the NPAs to at least half of the current levels by 31^st March, 2017.
Making 15 percent growth rate of deposits for next two years.
Drawing up of a monthly Monitorable Action Plan.
Placement of competent CEOs fulfilling ‘Fit & Proper’ criteria.
Putting Corporate Governance Systems in place.

The assistance from NABARD would be in the form of loan to the respective state governments under Section 27 of NABARD Act, 1981.
During the implementation of the scheme, operations of these 23 unlicensed DCCBs would be closely monitored by NABARD and RBI, so that they meet the licensing requirement within the time frame as prescribed in the scheme

Implications of this decision

The scheme will help in revival of these cooperative banks.
It will result in protecting the interests of depositors and catering to the credit needs of farmers.
Once revived, these cooperative banks would become eligible for obtaining licenses from RBI for continuing their operations in rural areas and would also be able to meet CRAR (Capital to Risk-Weighted Assets Ratio) requirement prescribed by RBI.

« Previous Post Next Post »