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Securitisation ordinance likely to cover co-ops also

The government on Tuesday indicated that the securitisation ordinance empowering banks and financial institutions with more powers to recover bad debts, would be extended to cooperative banks also.

"The securitisation ordinance was not applicable for co-operatives. But I have talked to finance minister on this issue and the ordinance may cover cooperatives also," the new Mininster of State for Finance Anandrao V Adsul said after assuming office in New Delhi.

Expressing concern over the pile of sticky assets in the financial sector, he said the NPA of banks are now at over Rs 60,000 crore (Rs 600 billion) apart from that of the financial institutions.

"The ordinance has been issued to enable banks and FIs to reduce their sticky assets," Adsul said.

The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest ordinance, empowers banks and FIs to take control of secured assets without going through legal hassles, if the defaulting companies fail to pay up loans within a stipulated time.

On financial irregularities in co-operatives, Adsul said, "any financial institution which comes under the Banking Regulation Act should be regulated by the Reserve Bank of India."

Attributing scams in cooperatives sector mainly to the dual control, he said, "while on one side, we have the state co-operative acts and on the other side we have Banking Regulation Act. Some people took advantage of this dual control."

Admitting political nexus in the cooperative sector, he said, "it increased the confidence of the scamsters to carry out financial irregularities."

Adsul said the government was considering stringent norms for co-operatives including quarterly disclosures of financial results including data on advances and investments.

Apart from ensuring higher credit flow from co-operatives, he said that the bank credit still does not reach the needy.

"The schemes are made for common man and small farmers. But even if it reaches to the rural sector, the bank branches don't ensure they reach to the needy."

"Setting target for bank credit to all the rural areas was necessary," he said.

The minister said that unemployment was a big problem in our country, especially in rural areas, which could be resolved only through concerted efforts of the public sector units and the banks.

"Banks should take the initiative of assisting the needy people through self-help groups, which would promote employment. Today small depositors' funds are mainly channelised to the big corporates," Adsul, also a Shiv Sena MP said.

He also said there was a need to increase insurance penetration and cover majority of the population. "LIC and GIC have done a commendable job in all these years but more needs to be done," he said.

In the backdrop of droughts virtually every alternate year, Adsul said, "there was a need to bring in more farmers under crop insurance schemes."

All the schemes that have been announced by banks and insurance companies need to be implemented properly in order to yield the desired results, he added.

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