The Rural Perspective
Whose Money is it Anyway – Only the Farmers’!
The Maharashtra State Cooperative Bank (MSCB) is an apex body that finances Cooperatives in the State of Maharashtra. It has often been in the centre of controversies for misdemeanors’ and misuse by politicians. While this is not unknown to Maharashtrians, it has now drawn national attention because of the involvement of nationally known political heavyweights from Maharashtra following the sacking of its entire 44-member Board of Directors by the Reserve Bank of India (RBI) and the appointment by the state chief minister of two Administrators to take charge of the MSCB.
The MSCB is the prime nodal agency in the agro finance supply chain formed by the National Bank for Agriculture and Rural Development (NABARD) to reach out to farmers in remote villages in state. It gets lucrative income by way of commissions simply by transferring funds received from NABARD to District Cooperative banks and other cooperatives. The District banks in turn finance farmers through their branches and coop societies at the village level.
Farmers are shareholders of cooperative societies and a part of their share capital goes to the MSCB via the District banks. Thus the basic capital requirements are furnished by share-holding farmers. NABARD charges MSCB a 3% interest while the farmer has to pay almost 14%. This 3-tier system thrives on a high interest income. The quantum of agro-finance is so huge that the 3-tier system collects massive amounts by way of interest alone. This itself is a good reason why there is need to reassess the rates of interest of interest paid by poor farmers who already are overburdened with other liabilities.
The Comptroller and Auditor General (CAG) Report on cooperative financing has drawn attention to the fact that sugar cooperatives alone have defaulted in the repayment of loans amounting to Rs.34,000 crores – which is really the taxpayers money- which is unrecoverable and may have to be written off.
There are numerous examples of violations of banking norms and procedures including various provisions of the Co-operatives Act under which all these institutions operate. Not only has the state co-operative ministry failed to enforce fiscal discipline but is also responsible for letting corruption reach such enormous heights because of its inaction. This is what compelled the RBI to take corrective and preventive action and to hold further enquiry into these irregularities.
As already pointed out the capital invested is that of the farmers in Maharashtra and every rupee lost belongs to them. They risk losing their share capital if something goes wrong. Leave alone the apex bank, whenever any cooperative goes bust because of corruption or financial mismanagement, the first victims are its shareholders – in this case the farmers - who already have lost crores of rupees in such liquidations, when government also writes off huge amounts of liabilities in the form of guarantees given for fictitious loans. This has been going on for years together and nobody really wants to get to the bottom of this.
On the other hand it would appear there is a conspiracy between the state government, the bank management (both bureaucrats and politicians) to defraud the farmers by entering into cozy arrangements in which it would seem that government and the bank administration have positioned themselves as both plaintiff and defendant now! Even a cursory examination will reveal that the very same people on both sides are taking on inter-changeable roles as the occasion demands! On the one hand they apply for a loan on behalf of a co-operative institution, and on the other they themselves sanction by virtue of the position they hold in the government or the bank! We have heard of two persons sharing a plate at a time, but here the one person concerned has the privilege of eating from two plates at the same time. This is a clever conspiracy to pocket funds on the one hand and raise queries on their misuse on the other!
It is also observed that this three tier system has proved to be the main obstacle in making available low interest loans to farmers. The Vaidyanathan Committee has suggested that NABARD finance farmers directly through district banks. Farmers can avail loans at the rate of 6% under this arrangement. But then our politicians lose an opportunity to play with such easy money for their political gains and games. Just as Jihadis often warn of Islam being in danger to justify their brutality, our political champions always declare the co-operative movement to be in danger, so as to siphon off funds, at the cost of the common man and poor farmer.
The RBI decision to dismiss the Board for incompetence & fraud (to put it mildly) is based on accepted banking norms, but it is now being tainted with political colors, neglecting proper investigation & corrections. The blame game between Sonia’s Congress and Pawar’s NCP is diverting attention from the extent and nature of the misappropriation of farmers’ share holdings. The state government where too the two are coalition partners, not surprisingly, does not seem to be serious enough. It has appointed two of its officials, as administrators. Both are known to have been mute spectators of the entire process for years together and failed in their legitimate role of preventing irregularities when they occurred. Their appointment, therefore is not so hopeful and does not give room for much confidence. These initial moves on the part of state government are quite indicative of a desire to hush up the entire scam. This should not be allowed to happen.
DR. GIRDHAR PATIL is an agricultural activist, and a commentator particularly rural matters He is also a medical practitioner based in Nashik, Maharashtra.