A Kannada proverb says that no purpose is served by trying to spud a well when the beard is already afire. Even commercial banks, more efficient than co-operative banks particularly where their receivables are concerned, failed to anticipate.

Going by what appears in a section of the press, co-operative banks in Maharashtra are facing a cash crunch owing to the high default on loans the said banks sanctioned in 2007-08. This has led to a situation where crop loans remain un-disbursed even to eligible farmers who qualify for fresh loans. Considering that the demand for crop loan in the current fiscal is in the region of Rs 9,500 crores, the said banks as well as the prospective borrowers definitely have reasons to worry.


The government of Maharashtra took up the issue with National Bank for Agriculture and Rural Development (NABARD), the national bank for agriculture and rural development. In the context of Maharashtra, this development is singularly unfortunate because the co-operative movement is strong and well spread out in the state. A whopping 75 to 80 per cent of the crop loan requirement is catered to by the co-operative banks and the primary agriculture co-operative societies or PACs, which these banks fund. Over the past two years, crop loan disbursement was in the region of Rs 6,000 – 6,500 crores. This requirement is likely to go up to Rs 9,500 crores this year since about 30,00,000 farmers will qualify for crop loan according to a senior state government officer. Agricultural operations cannot wait until such time as the formalities relating to the loan waiver scheme are complied with by the parties concerned (vide, 'Chidambaram proposes, God disposes', dated June 8, 2008) since it is going to be a long wait. According to the said officer, compliance as well as the reimbursement under the waiver scheme can be completed only by September. By then, the Kharif season will have come to an end and no benefit will thus accrue to the farmers. Therefore, the government has asked NABARD to provide funds to the co-operative banks immediately.

But the question is why the government failed to anticipate these developments. After all, it had ample time - almost four months at its disposal. The insensitivity of the government and the banks remind me of a Kannada proverb – it says that no purpose is served by trying to spud a well when the beard is already afire. It is surprising that even the commercial banks, generally perceived as more efficient than the co-operative banks particularly where their receivables are concerned, failed to anticipate. It is to be noted that commercial banks are also burdened with sticky crop loans in fiscal 2007-08. As a matter of fact, commercial banks and co-operative banks in the state are burdened with Rs 5,000 crores worth of sticky crop loans in fiscal 2007-08. The officer noted that for the co-operative banks the recovery percentage (in respect of loans) was a measly 10 and for the commercial banks it was in the range of 10 – 30!