Punjab Finance Minister Seeks Union Government’s Support for Amalgamation of DCCBS with PSCB

Harpal Singh Cheema

The Punjab Finance Minister Harpal Singh Cheema on Thursday urged the Union Government to convince the Reserve Bank of India (RBI) to approve the state proposal of amalgamation of District Co-operative Central Banks (DCCBs) with Punjab State Cooperative Bank (PSCB). He made a list of requests to the Central government viz., reinstating the 2% interest subvention to PSCB, reducing the rate of interest on refinancing of short-term agriculture loans from NABARD, infusing capital in cooperative banks on the pattern of commercial banks, reversing Capital to Risk Assets Ratio (CRAR) norms to 7 per cent, reducing GST on milk and milk products to minimum tax slab, and setting up National institute for New Product Development expertise in the state.

Addressing the Conference of State Cooperation Ministers held at Vigyan Bhawan, New Delhi, Harpal Singh Cheema said that for Punjab with 50362 square km of area, the 20 DCCBs were not feasible and this three-tier structure if converted to two-tier structure by amalgamating DCCBs with Punjab State Cooperative Bank (PSCB), would bring in efficiency and help in better administrative culture. “This will also help in a big way to utilise local capital available with some DCCBS with higher Capital to Risk Assets Ratio (CRAR) in a more equitable manner for the benefit of people in other geographical areas in the State”, Cheema added.

Urging the Union Government to convince RBI for approving the state proposal of amalgamation on priority, Cheema said that this would also do away with the requirement of maintaining Statutory Liquidity Ratio (SLR) at both levels and to have separate 21 CBS licenses in a small State, while adding that the State has already submitted the proposal to RBI by fulfilling all statutory requirements.

Punjab Finance Minister also raised the issue of 2 per cent interest subvention to Cooperative Banks which was stopped by Central government with effect from April 1, 2022.

Raising demand for reducing the rate of interest on refinance of short-term agriculture loans from NABARD, Cheema said that the rate of interest on refinance of short-term agriculture loans from NABARD was 2.5 per cent till 2006-07, which had gradually been increased to 4.5per cent over the last 15 years. “The upper limit for extending the loan to farmers is placed at 7 per cent. This leaves margin of only 2.5 per cent for three levels; PSCB, DCCBS and PACS. This rate is critical in mitigating losses incurred by three tier-structure while providing low-cost loans to the farmers”, said Cheema.

Punjab Finance Minister also stressed upon the need to infuse capital in Cooperative Banks on the pattern of Commercial Banks to strengthen the Cooperative Structure in the state as well as in the country. He said that capital Assistance of Rs 236.00 crore is required for maintaining CRAR in 11 DCCBS in Punjab during the current financial year.

Seeking reversal of CRAR norms to 7 per cent, Punjab Finance Minister said that as per the business model of Cooperative Banks, and the risk involved in the loans, Cooperative Banks were finding it difficult to maintain 9 per cent CRAR norms. “As of now, NABARD has stopped financing to four DCCBS in Punjab due to less CRAR and the number is likely to grow to eleven at the end of current financial year in the absence of capital infusion despite the fact that these Banks are working hard to ensure timely recovery”, said Cheema while requesting the Gol to intervene with RBI to give special relaxation to cooperatives with respect to stringent CRAR norms and reversing it to 7 per cent from current level of 9 per cent.

Batting for the viability of the Cooperative milk federation, Harpal Sing Cheema said that the GST on milk and milk products may be reduced to the minimum tax slab. He said that the financial benefit accrued out of this exemption may be further passed on to the end consumers as well as milk producers. He said that it would boost the rural economy and income of dairy farmers besides lowering the burden of the urban middle class.

Thanking Union government for rolling out the Agricultural Infrastructure Fund scheme, Punjab Finance Minister said that certain activities like food processing and allied activities related to dairy should also be included in this scheme to increase the viability and sustainability of cooperatives, and to meet the peculiar needs of state of Punjab. He said this can be done within the present financial limit of Rs. 2 crore.

Lauding the Union Cooperative Ministry’s plan to set up a National University for Cooperative education, Cheema said that a National institute for New Product Development expertise should be considered to be set up for Punjab in the cooperative sector for the purpose of technical research and new product development, in line with the National Institute of Food Technology Entrepreneurship and Management (NIFTEM) in Haryana and Central Food Technological Research Institute (CFTRI) in Karnataka.