Chandigarh: Punjab Finance Minister Harpal Singh Cheema on Thursday urged the Centre to impress upon the Reserve Bank of India to approve the state’s proposal of amalgamation of district cooperative central banks with Punjab State Cooperative Bank.
He also urged the Union government for reinstating 2 per cent interest subvention to Punjab State Cooperative Bank (PSCB), reducing rate of interest on refinance of short-term agriculture loans from NABARD, infusing capital in cooperative banks on the pattern of commercial banks, reversing Capital to Risk Assets Ratio (CRAR) norms to 7 per cent, according to an official release here.
The state government also sought reduction in goods and services tax on milk and milk products to minimum tax slab, and setting up a national institute for new product development expertise in the state.
Addressing a conference of state cooperation ministers in Delhi, Cheema said for Punjab with 50,362 square km of area, 20 district cooperative central banks (DCCBs) were not feasible and this three-tier structure if converted to two-tier structure by amalgamation of DCCBs with PSCB would bring in efficiency and help in better administrative culture.
This will also help in a big way to utilise local capital available with some DCCBs with higher CRAR in a more equitable manner for the benefit of people in other geographical areas in the State , Cheema added.
Urging the Union government to convince the RBI for approving the state proposal of amalgamation on priority, Cheema said that this would also do away with the requirement of maintaining Statutory Liquidity Ratio (SLR) at both the levels and to have separate 21 CBS licenses in a small state, while adding that the state has already submitted the proposal to RBI by fulfilling all statutory requirements.
The minister also raised the issue of 2 per cent interest subvention to cooperative banks which was stopped by the Centre with effect from April 1, 2022.
Welcoming the Union Cabinet’s decision to reinstate the 1.5 per cent of this subvention, Cheema requested to reinstate it further to 2 per cent.
Raising a demand for reducing the rate of interest on refinance of short-term agriculture loans from NABARD, Cheema said the rate of interest on refinance of short-term agriculture loans from NABARD was 2.5 percent till 2006-07, which had gradually been increased to 4.5 percent over the last 15 years.
The upper limit for extending the loan to farmers is placed at 7 percent. This leaves a margin of only 2.5 percent for three levels; PSCB, DCCBS and PACS.
This rate is critical in mitigating losses incurred by a three tier-structure while providing low-cost loans to the farmers , said Cheema.
He also stressed upon the need to infuse capital in cooperative banks on the pattern of commercial banks to strengthen the cooperative structure in the state as well as in the country.
He said capital assistance of Rs 236 crore is required for maintaining CRAR in 11 DCCBs in Punjab during the current financial year.
Batting for the viability of the cooperative milk federation, Cheema said the GST on milk and milk products may be reduced to the minimum tax slab.
He said the financial benefit accrued out of this exemption may be further passed on to the end consumers as well as milk producers.
He said that it would boost the rural economy and income of dairy farmers besides lowering the burden of urban middle class.
