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Rs 80-billion package for state co-op banks

For the financial restructuring of co-operative banks, the government has finalised a package of Rs 80 billion (Rs 8,000 crore) that will be issued through bonds to those states which undertake reforms in the sector.

Announcing the package in New Delhi, Union Agriculture Minister Ajit Singh said the financial aid would be provided under the 'carrot and stick policy' of the government and states would have to pass a model co-operative law to be eligible for the funds.

He said state co-operative banks would float bonds on which interest would be paid by the Centre and states in the ratio of 60:40. The money thus raised would be used for the banks' capital restructuring.

"The package is only for those states which will undertake co-operative reforms and free the sector from various shackles," the minister said.

However, if due to certain reasons a state was unable to pass the requisite law it would still be eligible for funds under the restructuring plan, provided certain conditions were fulfilled, he said.

Elections in co-operatives have been made mandatory. Those states which have nominated the officials in co-operatives will be kept out of the package.

Furthermore, states should not impose rules and issue directives on the functional aspects of the co-operatives which should have the freedom to take administrative decisions such as hiring of personnel.

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