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May 2008

UCBs rattled as farmers stop repaying loans

By Tarunkumar Singhal, Raman Jokhakar
Chartered Accountants
Reading Time 2 mins
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15 UCBs rattled as farmers stop repaying loans


The Rs.60,000-crore debt waiver has left urban cooperative
banks (UCB) and credit cooperative societies (CCS) baffled. Despite having a
large exposure to agriculture lending, the UCBs and CCS are unsure of any
benefits the loan waiver has offered to other larger banks.

Maharashtra Cooperatives Minister Patangrao Kadam declared a
fortnight ago the waiver package would be applicable to all cooperative
institutions thus going beyond the ambit of the three-tier cooperative credit
structure. There are 28,000 CCS in Maharashtra. About 70% of them are in rural
areas and 80% of their members are small farmers. Their deposits are Rs.32,000
crore and loans amount to Rs.26,000 crore. The UCBs have deposits of Rs.78,000
crore and loans of Rs.44,000 crore.

Mr. Kadam’s statement has not helped the UCBs and CCSs as
there is no word either from Nabard, or the State’s Co-operative Department or
the Central Government. But the loanees have stopped paying back their
instalments to the UCBs and the CCS. The Institutions are worried that the
non-payment may end up widening their NPAs ahead of the closure of the current
financial year. These institutions are demanding that the Government should make
its stand clear on the issue or give relaxation in the prudential norms.

(Source : The Economic Times, 18-3-2008)

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