Expressing disappointment over the RBI’s ban on deposits in District Central Cooperative Banks, Leader of Opposition in the Assembly Radhakrishna Vikhe-Patil has questioned the ability of the National Bank for Agriculture and Rural Development (NABARD) to check financial missteps, if any, in the DCCBs.
“The functioning of the DCCBs is inspected by NABARD. If the DCCBs are indulging in financial mismanagement, NABARD’s role too should be probed,” the former agriculture minister told The Indian Express. “… It is the duty of NABARD to highlight and stop violations of rules in the DCCBs. And if that is not happening, it should be taken to task,” said Vikhe-Patil.
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On the RBI’s ban on deposits in the DCCBs, Vikhe-Patil said, “The lion’s share of deposits in the DCCBs are held by farmers. By disallowing them to exercise their banking rights, you are questioning their credentials, which is unfortunate.”
“Whether it is the RBI, the Centre or the state government, they should take action against the violators. Why punish all the farmers who have invested their hard-earned money in the DCCBs, which has a vast network in rural Maharashtra,” he asked.
The RBI has put a ban on the DCCBs against allowing deposits of the old Rs 1,000 and Rs 500 notes. The central bank fears the DCCBs will be used as a safe haven by individuals and companies to park their unaccounted funds in the wake of the demonetisation.
Unlike the national banks, the DCCBs don’t come under the purview of the RBI. The rural co-operative credit system is primarily to ensure flow of credit to the agriculture sector with short-term and long-term co-operative credit structures.
The short-term co-operative credit structure has a three-tier system – Primary Agricultural Credit Societies (PACSs) at the village level, Central Cooperative Banks (CCBs) at the district level and State Cooperative Banks (StCBs) at the state level. The PACSs remain outside the purview of the Banking Regulation Act 1949 and, hence, not regulated by the RBI. StCBs/DCCBs are registered under provisions of the State Cooperative Societies Act of the state concerned.
The government has delegated the powers to NABARD under Section 35A of the Banking Regulation Act (As Applicable to Cooperative Societies) to inspect state and central cooperative banks.
While supporting reforms in the agriculture and cooperative sectors, Vikhe-Patil said, “The concept of cashless transactions is not practical. Even the United States and European countries have not succeeded. Maharashtra cannot adopt cashless transactions in the absence of necessary infrastructure.”
“Moreover, by opening cashless infrastructure to private players, what safeguards are you providing to the people,” he asked. “On the contrary, the government has pushed the vulnerable sections like the unorganised sector, farmers and small traders into financial uncertainty.”
The reforms, he added, have to be gradual. Citing an example, he said, “As the agriculture minister, I had taken the initiative to reform the Agriculture Produce Marketing Committees (APMCs) to eliminate middle-agents who were exploiting farmers. Similarly, I launched the ‘100 mobile vegetable markets’ concept to facilitate the delivery of farm produce directly to consumers.”
He said the government’s foremost concern should be the agriculture sector’s growth. Acknowledging that the sector’s growth has suffered due to wrong irrigation policies for the last 15 years, he said, “I admit we focused on big dams. Whereas, the need was to strengthen the water conservation projects to ensure water access to all farmers across the drought-prone regions of the state.”
“It is evident while taking drastic decisions like the demonetisation or banning deposits in DCCBs, the Centre and RBI appears to have overlooked the larger concerns of the farm sector. They have not paid much attention to how their decision will impact the rural economy, which is 80 per cent cash-driven.”