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Existence of cooperative banks should be preserved, Sharad Pawar writes to PM Modi

NCP chief Pawar also sought to debunk the notion that cooperative banks are faring worse than other banks, and called them the backbone of India's rural economy.

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Mumbai: NCP chief Sharad Pawar has written to Prime Minister Narendra Modi, saying that the “existence” of cooperative banks and their “cooperative character” should be protected.

The former Union minister also sought to debunk the notion that cooperative banks are faring worse than other banks, or converting them into private entities would end frauds or irregularities.

Pawar published the letter dated August 15 on his Twitter account on Tuesday night. The letter referred to Modi’s Independence Day speech.

“You (Modi) said that cooperative banks are brought under the supervision of the Reserve Bank from the point of view to protect the interest of the middle class.”

“I welcome and appreciate the objective”, he said.

“However, at the same time, I honestly feel that the existence of cooperative banks and their `cooperative’ character shall be preserved,” Pawar said.

The cooperative banking sector has been the backbone of the rural economy, he said.

Due to their widespread branch network, the Reserve Bank (RBI) finds it impossible to conduct inspection of all Urban Cooperative Banks (UCBs) in the country every year, he said.

Therefore the Central bank has been trying to convert the UCBs into private banks since 1993, but has not succeeded, Pawar claimed.

“Sir, though I agree with you that there should be financial discipline in the banks, but certainly it would be incorrect to say that such conversion of cooperative sector into private sector would completely or partially prevent misappropriation of funds, financial irregularities and frauds in the banking sector,” the letter said.

In fiscal 2019-20, according to RBI, public sector and private sector banks reported 3,766 and 2,010 frauds, while cooperative banks reported only 181 frauds, he pointed out.

The amount involved in frauds in public sector banks was Rs 64,509.90 crore or 90.20 per cent of the total amount involved in frauds during the fiscal, while that in private sector banks was Rs 5,515.10 crore or 7.69 per cent, he said.

“In the financial year 2019-20, an alleged fraud of Rs 4,355 crore was identified in PMC Bank scam, while during the first half year itself a fraud of approximately Rs 95,700 crore was reported in nationalised banks,” Pawar said.

“Therefore, it is not correct to say that misappropriation of fund or financial irregularities are observed in cooperative banks only,” he said.

The RBI often alleges that cooperative banks suffer from a lack of professionalism, Pawar noted.

However, as per the RBI’s own data, gross and net NPA percentages of commercial banks are 9.68 per cent and 5.31 per cent; on the other hand, the gross and net NPA percentages of UCBs are 7.51 per cent and 2.53 per cent, he said.

Out of the 1,544 UCBs only 70 are in the `D’ category, Pawar said, adding that therefore, “it is ridiculous to state that there is no professionalism in cooperative banks”.

He also said that what happened at Punjab and Maharashtra Cooperative (PMC) Bank was a “fraud” and not a “business failure of cooperative banks.

“I, therefore, earnestly request you to kindly look into the matter personally and give justice to the cooperative banking sector…,” Pawar said in the letter.

Also read: Modi govt and RBI can learn from mistakes made during 2008 crisis, but time’s running out


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