1. VAIDYANATHAN COMMITTEE REPORT ON REVIVAL OF CREDIT COOPERATIVE INSTITUTIONS

2. Cooperative Credit Institutions
Century old Credit Institutions in India.
Implied Values of Public –Private Partnership
Vast Outreach.
Local Feel & market access.
Credit needs of small & marginal farmers met mostly through Cooperatives.
Market Share of Cooperatives -
Rural Outlets : 69%
Rural Credit : 31%
Vaidyanathan committee report

3. Rural Cooperative Credit Structure
Vast and heterogeneous network
Quantitatively impressive
112,309 PACS
367 DCCBs (12,547 branches)
30 SCBs (866 branches)
20 SCARDBs (859 branches)
768 PCARDBs (1013 branches)
Vaidyanathan committee report

4. Rural Cooperative Credit Structure
Qualitatively impaired
Huge accumulated losses; High NPAs; Assets & Deposit erosion
On balance
Relevant
Should be turned around, will require substantial financial assistance
But subject to strict conditionalities regarding
• legal reforms
• institutional restructuring
• Good governance
• Regulatory prescription
Vaidyanathan committee report

5. CCS – Governance, legal & regulatory issues
No elections for long periods in certain States.
Boards superseded in a number of SCBs/DCCBs
State Governments combine the role of Dominant Shareholder, Management, Supervisor and Auditor
Financial Disclosures not transparent
RBI’s ability to enforce its regulatory powers constrained.
NABARD exercising supervisory powers on behalf of RBI.
Vaidyanathan committee report

6. Recovery position is a matter of serious concern .
Credit related issues
Market share in agricultural credit is steadily declining from 43% in to 31% in and further to 27% by 28 Feb
Share in disbursement of Investment Credit sharply declined from from 26% in to 13% in
Cooperatives are the only institution not achieving the targeted 30% growth in agricultural credit this year.
Recovery position is a matter of serious concern .
As on 30 June 2003 the recovery % against the demand was 61% for DCCBs and 67% for PACS.
Vaidyanathan committee report

7. Major issues of concern for Cooperative Credit Structure
7 out of 30 SCBs & 143 out of 367 DCCBs are not complying with provisions of Section 11(1) of BR Act, 1949 as on , i.e. not meeting minimum capital requirements.
Accumulated losses, asset and deposit erosion have assumed alarming proportions.
No diversification in business; Not much scope for cross subsidization.
High cost of resources and high intermediation costs due to 2/3 tier system
Vaidyanathan committee report

8. State Coop Banks
Vaidyanathan committee report

9. DCC Banks
Vaidyanathan committee report

10. PACs
Vaidyanathan committee report

11. Recovery Status of Credit institutions
Vaidyanathan committee report

12. Major issues of concern for Cooperative Credit Structure …..Contd.
High NPAs ; high risk premium in lending
Loan appraisal systems, monitoring very poor;
Poor internal checks and controls;
Financial disclosures not transparent.
Duality of control.
Poor HR practices; non-professional banking staff.
PACS very weak; nearly half of them incurring losses; need for reorganisation and modern business development models.
Vaidyanathan committee report

13. The Task Force has submitted its report on 15 February 2005.
Task Force on Revival of Coops
GoI constituted a Task Force under the Chairmanship of Prof. A Vaidyanathan to suggest an implementable action plan taking into account the recommendations of earlier committees.
The Task Force has submitted its report on 15 February 2005.
Vaidyanathan committee report

14. Observations of Task Force
Strengthening governance and regulation must precede financial assistance for revival of Cooperatives.
Financial impairment of the Co-op Credit Structure(CCS)due to impairment in governance and management.
Legal and regulatory impasse deriving from duality of control.
Pervasive,rather intrusive, interference by State Govts. in financial,administrative and operational matters.
Credit Co-operatives should be autonomous and member driven.
Revival to start from PACS upwards.
Vaidyanathan committee report

15. Rs 1644 Cr. (16%) by the Cooperative Credit Structure
Financial Package to fund accumulated losses,build CRAR at 7%, provide for retirement of State equity and extend technology support
The estimated liability of various agencies (Short Term Credit Cooperatives only) – Rs.10,839 Cr.
Rs 5793 Cr. (53%) by GOI
Rs 3402 Cr. (31%) by State Govt
Rs 1644 Cr. (16%) by the Cooperative Credit Structure
Scheme likely to take 3-5 yrs. for full implementation
RECOMMENDED FOR SIMILAR COMMITTEE FOR LONG TERM STRUCTURE
Vaidyanathan committee report

16. Package of Revival of Credit Cooperative Institutions
Financial Package
Institutional reforms
Legal and regulatory reforms
Vaidyanathan committee report

17. Losses arising out of agricultural loses (Direct and indirect)
Sharing Pattern
For PACs: All losses arising of all activities ie., agricultural and non agricultural.
For DCCBs:
Losses arising out of agricultural loses (Direct and indirect)
Losses arising from loans to other coops
Vaidyanathan committee report

18. Implementation
State Govts should accept the package in toto including legal and regulatory changes, institutional reforms and their share of financial commitment
Release of funds will be linked to the progress in actually implementing the revival package
Vaidyanathan committee report

19. State Govts should retire from share capital
Reforms suggested
State Govts should retire from share capital
No nominees of the State Govt on the board of the institutions
Professionals on the board
Professionally qualified CEO for Banks and properly trained secretaries for PACs
CEO appointed from the board
Vaidyanathan committee report

20. State Govts should retire from share capital
Reforms suggested
State Govts should retire from share capital
No nominees of the State Govt on the board of the institutions
Professionals on the board
Professionally qualified CEO for Banks and properly trained secretaries for PACs
CEO appointed from the board
Vaidyanathan committee report

21. Regulatory and legal reforms suggested
Removing state intervention in administration and financial matters
No restrictive orders on financial matters
Wider access to financial institutions for coops
Limiting powers of state to supersede the board
Vaidyanathan committee report

22. Institutional Reforms
Common Accounting system
Computerization
Training to staff and management
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23. For DCCBs and SCBs : Chartered Accountants
AUDIT
For DCCBs and SCBs : Chartered Accountants
For PACs: Option for Audit from Chartered Accountants
Vaidyanathan committee report

24. Implementation mechanism
States will have to sign MOU with Central Govt
Willingness of state to sign
Assessment by NABARD: Special audit
Signing of MOU
Release of State Govt’s Share
Central Govt’s share will be released through NABARD
Vaidyanathan committee report

25. Implementation mechanism
Capacity building programs from NABARD
12 from each state master trainers: At lucknow
Trainers training at state leveles
4 days for PACs secretaries and 2 days for Board
Vaidyanathan committee report

26. Progress States which have signed MOU Maharashtra Orissa
Madhya Pradesh
Gujarat
Andhra Pradesh
Uttar Pradesh
Bihar
Uttaranchal
Arunachal Pradesh
Haryana
Vaidyanathan committee report

27. Karnataka Cabinet approves and again withheld
Finally state approves during the governors regime.
Vaidyanathan committee report

28. THANK YOU
Vaidyanathan committee report