Backtrack on terms of revival scheme presented by NABARD
THIRUVANANTHAPURAM: District cooperative banks (DCBs) of Thiruvananthapuram and Kannur backed-tracked on the undertaking to NABARD (National Bank for Agriculture & Rural Development) on a key scheme aimed at saving the heavily indebted handloom weavers in Kerala.
The breach of commitment by district cooperative banks resulted in denial of fresh loans/loans at cheaper rate to Primary Handloom Weavers’ Co-operative Societies (PHWCSs) and thereby defeating the objective of the scheme.
Worse, instead of handholding the impoverished weavers and their cooperative societies towards financial safety, the fund provided by NABARD was used by these coop banks to safeguard themselves from any possible financial loss.
In order to save these weavers and societies, Government of India (GoI) announced a Revival, Reform and Restructuring (RRR) package with a total outlay of Rs3,884 crore, whereby NABARD was roped into structure the financial package involving district cooperative banks (DCBs) from each district.
Under the Scheme, funds equivalent to principal and 25 per cent of interest on the non-performing asset (NPA) [which was overdue as of March 2010] would be provided by NABARD to lending institutions towards repayment of loan availed by the Primary Handloom Weavers’ Co-operative Societies (PHWCSs) and Apex societies and individuals.
The balance 75 per cent of the overdue interest and the entire penal interest, if any, would have to be written off by the lending banks as a pre-condition to partaking in this scheme. The funds required for the scheme were to be shared by Central and Kerala governments.
The scheme also envisaged lending institutions to provide fresh loans to the weavers’ societies and individual handloom weavers at 6 per cent rate of interest.
Moreover, for the fresh loans given by these lending institutions, NABARD would sanction an interest subsidy of a maximum 7 per cent on submission of claims for subsidy.
GoI sanctioned between March 2013 and September 2014, Rs165.34 crore for implementation of the scheme and GoK contributed another Rs45.31 crore as the state share in respect of 357 PHWCSs, Hantex and 1,204 individuals in two phases.
An audit on the scheme in five selected districts revealed that the district cooperative banks of Thiruvananthapuram and Kannur didn’t bother to follow the terms agreed on the scheme.
The District Co-operative Bank (DCB), Thiruvananthapuram received Rs84.87 crore from NABARD between March 2013 and March 2015, towards repayment of loan and interest availed by 292 PHWCSs.
NABARD repaid the loan after the DCBs committed to issue fresh loans and to waive interest. Despite this, in respect of 152 PHWCSs, DCB Thiruvananthapuram neither issued fresh loan nor did it waive interest amounting to Rs41.31 crore on the loan after it became NPA.
Instead, the interest of Rs 41.31 crore was treated as fresh loan, which was in total defiance to the guidelines of the scheme. As a result, loan liability remained with the PHWCSs without any additional cash inflow. Non-waiver of interest was thrown to the winds on the ground that the waiver would affect the financial position of DCB.
DCB, Kannur went a step ahead and collected interest at the rate of 11.50 per cent, instead of 6 per cent on fresh loan of Rs 3.70 crore sanctioned to 27 PHWCSs without claiming interest subsidy from NABARD.
General Manager, District Industries Centre (DIC), Kannur said that though proper direction was given to the DCB in this regard, it was not considered favourably. Further, there was lapse on the part of bank authorities in not claiming interest subsidy of 5.50 per cent from NABARD.
Commenting on the DCB stand, Kerala Government said that the matter was under their consideration and action to rectify the defects pointed out by Audit would be taken shortly.