September 30, 2022

PUNJAB MINISTER OF FINANCE SEEKS UNION GOVERNMENT SUPPORT FOR MERGER OF DCCBS WITH PSCB

Union Home and Cooperation Minister Shri Amit Shah during a two-day national conference of state cooperation ministers in New Delhi on September 08, 2022.

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Said the merger will bring efficiency and a better administrative culture

Addressing the Conference of State Cooperation Ministers, Cheema raises various issues to improve the viability of the cooperative

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Chandigarh, Sep 08 (Shivam Madaan) Punjab Finance Minister Harpal Singh Cheema’s lawyer on Thursday urged the Union government to persuade the Reserve Bank of India (RBI) to approve the state’s proposal to merge District Cooperative Central Banks (DCCB) with Punjab. State Cooperative Bank (PSCB). He also impressed the Government of India for reinstating the 2% interest subsidy to PSCB, reduction of interest rate on refinancing of short-term agricultural loans from NABARD, injection of capital into cooperative banks on the model of commercial banks, reversing the capital to risk assets ratio (CRAR) standards to 7 percent, reducing the GST on milk and dairy products to the tax minimum and creating the expertise of the National Institute for the development of new products in the state.

Addressing the Conference of State Cooperation Ministers held at Vigyan Bhawan, New Delhi, Harpal Singh Cheema said that for Punjab with an area of ​​50362 sq km, the 20 DCCBs are not feasible and this structure three-level structure would be converted to a two-level structure by amalgamation. DCCBs with the Punjab State Cooperative Bank (PSCB), would bring efficiency and contribute to a better administrative culture. “It will also go a long way in using the local capital available with certain DCCBS with a higher capital-to-asset-at-risk (CRAR) ratio more equitably to benefit people in other geographic areas of the state,” added Cheema.

Urging the Union government to convince RBI to approve the state merger proposal as a matter of priority, Cheema said it would also remove the requirement to maintain the statutory liquidity ratio (SLR) at both levels and to having 21 separate CBS licenses in a small state, while adding that the state has already submitted the proposal to RBI fulfilling all legal requirements.

The Punjab Finance Minister also raised the issue of the 2% interest subsidy to co-operative banks which was terminated by Gol with effect from April 1, 2022. Welcoming the decision of the Union Cabinet to reinstate the 1.5% of this subsidy, Cheema asked to restore it following the 2%.

Raising the demand to reduce the interest rate on the refinancing of NABARD’s short-term agricultural loans, Cheema said that the interest rate on the refinancing of NABARD’s short-term agricultural loans was 2.5% until in 2006-07, which had been gradually increased to 4.5% over the past 15 years. “The upper limit for granting the loan to farmers is set at 7%. This leaves a margin of only 2.5% for three levels; PSCB, DCCBS and PACS. This rate is key to mitigating losses incurred by the three-tier structure while providing low-cost loans to farmers,” Cheema said.

The Finance Minister of Punjab also stressed the need to inject capital into cooperative banks modeled after commercial banks to strengthen the cooperative structure in the state as well as the country. He said capital assistance of Rs 236.00 Cr is required to maintain CRAR in 11 DCCBS in Punjab in the current financial year.

Seeking to overturn CRAR standards at 7%, Punjab’s finance minister said that in line with the business model of cooperative banks and lending risk, cooperative banks are struggling to maintain CRAR standards at 9%. “As of now, NABARD has stopped funding four DCCBS in Punjab due to fewer CRARs and the number is expected to increase to eleven by the end of the current financial year in the absence of capital injection despite the fact that these banks are working hard to ensure a speedy recovery,” Cheema said while asking the Gol to intervene with RBI to grant special co-op easing on the tough CRAR standards and bring it down to 7% from the current level of 9%.

Fighting for the viability of the Cooperative Dairy Federation, Harpal Sing Cheema said the GST on milk and dairy products could be reduced to a fiscal minimum. He said the financial benefit from this exemption could be passed on to end consumers as well as milk producers. He said it would boost the rural economy and the incomes of dairy farmers in addition to reducing the burden on the urban middle class.

Thanking Gol for rolling out the agricultural infrastructure fund scheme, the Punjab Finance Minister said that some activities such as food processing and dairy related activities should also be included in this scheme to increase sustainability. and sustainability of cooperatives and to meet the special needs of the state of Punjab. He said it can be done within the current financial limit of Rs. 2 crores.

Welcoming the Union Cooperative Ministry’s plan to establish a national university for cooperative education, Cheema said a national institute for new product development expertise should be considered to be established for Punjab in the cooperative sector for the purposes of technical research and new product development, in agreement with the National Institute of Food Technology Entrepreneurship and Management (NIFTEM) in Haryana and the Central Food Technological Research Institute (CFTRI) in Karnataka

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