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Co-op banks will have to go for one-time settlement of NPAs soon

BS Banking Bureau

The co-operative banks in the country will be soon be asked to go in for one-time settlement of their non performing assets (NPAs) to clean up their balance sheets, Balasaheb Vikhe Patil, union minister of state for finance, said.

This move comes in the backdrop of the involvement of some of these banks in the pay order scam involving entities in the stock and bullion markets and to restore the credibility of the co-operative banking system.

"When the one-time settlement scheme was introduced for the public sector banks (PSBs), the co-operative banks were left out. A scheme similar to the one for PSBs will be introduced once the Madhava Rao Committee report is implemented," Patil said.

He said the recommendations of the Madhava Rao Committee on the functioning of co-operative banks will be implemented next month. The issue of dual control (regulation) of these banks - by the Reserve Bank of India (RBI) on monetary matters and by the Registrar of State Co-operatives in case of administrative matters - will also be resolved.

The minister expressed his unhappiness at the level of lending by private sector banks to the agriculture sector. Though the performance of these banks was satisfactory on the priority sector lending front, their lending to the farm sector amounted to less than 10 per cent of their outstanding credit.

Patil said the economy was showing signs of recession and that cuts in the benchmark rates did not necessarily spur the economy as the inflation factor had to be kept in mind.

He pointed out that when the Federal Reserve recently cut the federal funds rate, the stock markets there in fact plunged and it also did not lead to any increase in demand.

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