Page 23 - Banking Finance August 2020

CO-OPERATIVE BANK NEWS

Govt may allow co-op pared to the target of Rs. 3 trillion, of cooperative sector into private sec-
cooperative banks can be allowed to tor would completely or partially pre-
banks to lend under lend under the scheme, Gadkari said. vent misappropriation of funds, finan-
scheme for MSMEs cial irregularities and frauds in the bank-
The government may include coopera- Existence of cooperative ing sector," the letter said.
tive banks as a lending institution under banks should be pre- In fiscal 2019-20, according to RBI,
the Emergency Credit Line Guarantee public sector and private sector banks
Scheme (ECLGS) that was announced to served, Sharad Pawar reported 3,766 and 2,010 frauds, while
support stressed micro, small and me- writes to PM Modi cooperative banks reported only 181
dium enterprises (MSMEs). NCP chief Sharad Pawar has written to frauds, he pointed out.
MSME minister Nitin Gadkari said the Prime Minister Narendra Modi, saying The amount involved in frauds in pub-
finance minister will take a decision that the "existence" of cooperative lic sector banks was Rs 64,509.90
soon. "The finance minister has ex- banks and their "cooperative charac- crore or 90.20 per cent of the total
plained that due to the dual regulation ter" should be protected. The former amount involved in frauds during the
and supervision, cooperative banks are Union minister also sought to debunk fiscal, while that in private sector
not included as member lending insti- the notion that cooperative banks are banks was Rs 5,515.10 crore or 7.69
tutions (MLIs) under ECLGS. However, faring worse than other banks, or con- per cent, he said.
data regarding their financial position verting them into private entities "In the financial year 2019-20, an alleged
is being collected from scheduled state would end frauds or irregularities. fraud of Rs 4,355 crore was identified in
cooperative banks and urban coopera- Pawar published the letter dated Au- PMC Bank scam, while during the first
tive banks to include them as MLIs for gust 15 on his Twitter account on Tues- half year itself a fraud of approximately
the scheme, in consultation with Re- day night. The letter referred to Modi's Rs 95,700 crore was reported in
serve Bank of India (RBI), depending on Independence Day speech. "You nationalised banks," Pawar said. "There-
availability of headroom of the (Modi) said that cooperative banks are fore, it is not correct to say that misap-
scheme." Gadkari told attendees at brought under the supervision of the propriation of fund or financial irregulari-
the MSME Conclave organized by FICCI Reserve Bank from the point of view ties are observed in cooperative banks
Karnataka State Council. to protect the interest of the middle only," he said. The RBI often alleges that
At present, all public sector and pri- class." cooperative banks suffer from a lack of
vate sector banks and non-banking fi- "I welcome and appreciate the objec- professionalism, Pawar noted.
nancial companies (NBFCs) have ex- tive", he said. "However, at the same However, as per the RBI's own data,
tended loans under ECLGS. time, I honestly feel that the existence gross and net NPA percentages of
ECLGS is part of the government's Rs. of cooperative banks and their `coop- commercial banks are 9.68 per cent
20-trillion financial package to help the erative' character shall be preserved," and 5.31 per cent; on the other hand,
poor and small businesses tide over the Pawar said. The cooperative banking the gross and net NPA percentages of
covid-19 crisis, by providing them ad- sector has been the backbone of the UCBs are 7.51 per cent and 2.53 per
ditional funding of up to Rs. 3 trillion. rural economy, he said. cent, he said. Out of the 1,544 UCBs
"The main objective of the scheme is Due to their widespread branch net- only 70 are in the `D' category, Pawar
said, adding that therefore, "it is ridicu-
to provide an incentive to MLIs, that work, the Reserve Bank (RBI) finds it lous to state that there is no profession-
is, banks, financial institutions and impossible to conduct inspection of all alism in cooperative banks".
NBFCs to increase access to, and en- Urban Cooperative Banks (UCBs) in the
able availability of additional funding country every year, he said. Therefore He also said that what happened at
facility to MSME borrowers, in view of the Central bank has been trying to Punjab and Maharashtra Cooperative
the economic distress caused by the convert the UCBs into private banks (PMC) Bank was a "fraud" and not a
covid-19 crisis by providing them 100% since 1993, but has not succeeded, "business failure of cooperative banks.
guarantee for any losses suffered by Pawar claimed. "I, therefore, earnestly request you to
them due to the non-repayment of the "Sir, though I agree with you that kindly look into the matter personally
GECL funding by borrowers," the gov- there should be financial discipline in and give justice to the cooperative
ernment had said in May. Since dis- the banks, but certainly it would be banking sector…," Pawar said in the
bursement is only Rs. 1.2 trillion, com- incorrect to say that such conversion letter. T

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