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Tuesday, July 17, 2018

Govt panel to study merger of weak DCCBs with MSC Bank

Committee also tasked to study reasons for financial weakness of banks, suggest ways for improvement

By: Express News Service | Pune | Published: November 4, 2017 7:12:46 am

The state government has formed a committee to study the feasibility of merging financially weak District Central Cooperative Banks (DCCBs) with the Maharashtra State Cooperative (MSC) Bank. The panel, headed by former NABARD chairman Yashwant Thorat, is expected to submit its report in a month’s time. In the three-layered cooperative lending structure, the DCCBs disburse crop loans to village level Primary Agricultural Cooperative Societies (PACS), which in turn lend to the farmers.

The state has 31 DCCBs, which lend to more than 21,000 PACS. The MSC Bank is the apex bank of all the DCCBs. Over the years, the share of these primarily rural banks have gone down to around 40 per cent of the outlay but they lend to almost 60 per cent of the farmers in the state.

The financial health of these banks over the last few years has deteriorated, with many of them being rocked by corruption charges.

The banks of Wardha, Buldhana and Nagpur had lost their licence due to mounting bad loans. While these three banks received government recapitalisation and subsequently got their licence, the business of these banks has almost come to a halt.

Drought and the inability of the farmers to repay loans have taken a toll on the banks, with 14 of the 31 banks reporting high amounts of bad loans.

Other than Thorat, the committee includes the cooperation commissioner, CEO of the Kolhapur DCCB and five others. The mandate of the committee is to study the feasibility of merging weak DCCBs with the MSC Bank. MSC Bank has increased its retail footprint in various parts of the state and the proposed merger is expected to further improve it. The committee has also been tasked to study the reasons for the financial weakness of the banks and suggest ways to improve.

Politically, the control of the DCCBs has always been with either the Congress or the NCP. The BJP has not been able to make much inroads in these structures, an important cooperative setup.

Merger of the banks, many say, might help the party in gaining control of the banks from its political rivals.

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