Rs 15,000 crore for co-op bank revamp

The central government has decided to take upon itself the entire financial burden of revitalising cooperative banks — a sum of Rs 15,0...

The central government has decided to take upon itself the entire financial burden of revitalising cooperative banks — a sum of Rs 15,000 crore as estimated by the Vaidyanathan Committee.

According to official sources, state governments which are to bear 25 per cent of this cost, amounting to Rs 3,500 crore, would get soft loans from the Centre for this purpose.

Finance Minister P. Chidambaram will meet the state finance ministers and chief ministers to finalise the new plan soon. “The finance ministry has decided to provide soft loans to the states to bear their part of the cost. Therefore, technically, it would be the Centre which would bear the full cost of revitalising the co-operative banks,” a senior government official said.

The entire exercise may be undertaken in a phased manner spread over a period of about four years.

However, the state governments would have to sign a memorandum of agreement with the Centre to ensure implementation of the programme, which includes issues like governance. RBI will supervise the overall programme.

“Once the MoU has been signed between the Centre and the states, the revamping exercise would immediately start,” the official pointed out.

The financial health of regional rural banks (RRBs) is also in a shambles. The Centre is likely to take a decision on the merger of RRBs in a few weeks.