All about the Collapse of Cooperative Cash after Demonetization

It was not until the peak kharif operations that the news of demonetization-induced collapse of cooperative credit surfaced to the fore. In Maharashtra, where farmers were supposed to reap benefits of institutional funding during kharif farming, the cooperative fiscal scenario is dismal to say the least. Read on to unravel.

Maharashtra: The Fall of Cooperative Banking

The gradual death of cooperative credit is a reality in Maharashtra. The state has received around 13% more monsoons this season, and this was the time farmers wanted to steer their kharif agricultural operations in full swing. The dismal performances of the cooperative banks in the state documented below will tell you why these farmers’ ambitions are seriously hurt.

It was only in the last kharif that NDCCB or Nashik District Central Cooperative Bank actually disbursed crop loans worth INR 1,608.55 crore. The target during the last April-June season exceeded by around 350 crore. This season, however, the bank has only given out a paltry INR 61.41 crore (as has been reported till June 27, 2017) and couldn’t even meet a much lower target of INR 1,101.05 crore.

The statewide financial fall

And no! Reading this, one would be absolutely erroneous in considering NDCCB as just an isolated struggling cooperative bank. The entire state is distraught with such worrisome prospects of agricultural finance after demonetization.

Across the state, the total disbursements made by DCCBs were only worth INR 5707.42 crore from April till June 27, 2017. The figure makes for a paltry 55% of what had been disbursed in April-June 2016.

Ask the grape farmer from Nashik, Santosh Garade and he will tell you that between May and the end of June, farmers should have been able to steer at least four rounds of pruning for four-acre vineyards. However, he hasn’t been able to conduct a single pruning this season so far. Pruning, notably, is necessary for the proper flowering of the crop from September to October and the consequent development of the fruit towards February – March next year.
Gorade goes on to explain that he needed to invest around INR 50,000 per acre for six rounds or pruning along with the application of fungicides, fertilizer and micronutrients. He has not been able to raise that money today either from the Nashik District Central Cooperative Bank or from the Bank of Maharashtra.

Demonetization and the Fall of Cooperative Cash

Notably, for the present kharif season, the state had set a total crop loan target worth INR 40,547.20 crore. The commercial banks have given out INR 24, 985 crore of this amount. DCCBs have only disbursed INR 13,108.38 crore and the remaining balance has come from regional rural banks. The current credit meltdown is largely about the DCCBs. It’s the cooperatives that are responsible for reaching out to the small and marginal farmers. Their services are designed to bail farmers with moderate loan requirements out of their financial woes.

It took just 3 days after the November 8 announcement to predict the possible fall. The banks were not allowed by the RBI to accept and exchange outlawed notes. Officially it was declared that they did not have fool-proof KYC systems backing their services – owing to which it was deemed that they might become the possible treasure trove of illicit cash.