This urban credit cooperative society strikes gold in farm loans!
By Shishir Arya, TNN | Mar 11, 2013, 01.52 AM IST
**This indicates of lack of seriousness of the banks to provide farm loans. "It is not illegal to lend against gold but it is not an encouraging trend especially when the government is pushing farm loans through banks at subsidized rates. In this budget, even private banks have been proposed to get the subsidy**
NAGPUR: If banks have to be pushed to meet their farm loan targets, this urban credit cooperative society has literally struck 'gold' in this business.
The Buldhana Urban Credit Cooperative Society ( BUCCS) has an exposure of Rs 700 crore from loans doled out to farmers. With this, it sits on as much as 1.5 tonnes of gold pledged by borrowers to get the sum. The cooperative has its headquarters in the drought hit district of Buldhana.
Credit societies normally are smaller entities as compared to banks but this cooperative's lending to the farm sector comes to more than 12% of the total loans granted in Vidarbha by the regular banking channel.
A senior official in the Reserve Bank of India, (RBI), said in the year 2012-13, a target of Rs 5,700 crore has been set for crop loans by banks till March end. The actuals are almost close to it. This does not include loans by cooperative societies, which even otherwise do not operate in this sector. Crop loans are provided to meet the yearly sowing requirement. Banks provide gold loans too as a means of top-up finance.
For the cooperative society this may be a success story, but it also raises concern for farm experts. The regular banking channel which lends at a concessional rate of 6% is mandated to keep 18% of its advances for the farm sector. The Buldhana Society on the other hand lends at 14% to 16% against gold.
Dr Sukesh Zawar its managing director who provided TOI with figures of gold pledged and the amount lent says it is one of the flagship products of the organization. "Gold loans are short-term credit for a year or so provided apart from the crop loans. The amount increases during rainy season when sowing begins. The society grants crop loans too but its exposure is just around Rs 100 crore, out of total advances of over Rs 2000 crore. It has operations all over state with 265 branches, he said.
Zawar agreed that this also reflects failure on part of the banks which have too lengthy a procedure for granting farm credit. He stressed that loans against gold were more popular among the farmers. Loans at 50% to 60% of the gold pledged are granted.
Farm activists however, raised concern over the phenomenon. Kishore Tiwari of Vidarbha Jan Andolan Samiti says this indicates of lack of seriousness of the banks to provide farm loans. "It is not illegal to lend against gold but it is not an encouraging trend especially when the government is pushing farm loans through banks at subsidized rates. In this budget, even private banks have been proposed to get the subsidy," said Tiwari.
Vijay Jawandiya, the founder member of Shetkari Sanghatana, said a large number of farmers have once again defaulted after availing the debt waiver scheme. Due to this they are not eligible for bank loans and have to resort to other lending agencies.
Zawar said the society which is also a part of the International Alliance of Cooperatives (IAC), has taken up large scale social work. It has built check-dams, schools and taken up village adoption programmes.
The society is the first supporting member from India of the Asian Confederation of Credit Union, a global body of cooperatives.