Cooperative Credit Structure
Cooperative Credit Structure
system in the State. It provides credit to the people particularly in rural areas at
reasonable interest rate thereby reducing the dependency of the farmers on the
informal credit source and usurious rate of interest. Geographically and culturally it is
the most convenient institutional arrangement for availing the credit by farmers.
(A) Short term and medium term credit structure consisting of Tamil Nadu State Apex
Cooperative Bank at the state level, Central Cooperative Banks at the district level and
(B) Long term rural credit structure consisting of Tamil Nadu Cooperative State
Agriculture and Rural Development Bank at the state level and Primary Cooperative
(C) Urban credit structure comprising of Cooperative Urban Banks located in the
urban and semi urban areas and catering to the credit needs of their members and the
public.
The Short Term Cooperative credit structure in Tamil Nadu is a three tier structure
with Tamil Nadu State Apex Cooperative Bank at State level with 45 branches, 23
District Central Cooperative Banks at the district level with 717 branches and 4474
Cooperative Banks. Being the Apex Bank, it raises resources and channelises them
through District Central Cooperative Banks for both agricultural and non-agricultural
purpose. It also channelises the refinance provided by National Bank for Agriculture
and Rural Development (NABARD) towards short term and medium term agriculture
As on 29.2.2008, the Tamil Nadu State Apex Cooperative Bank has a share capital of
Rs.61.07 crores including Government’s share of Rs.0.26 crore. It has the reserves of
Rs.700.48 crores and deposits of Rs.3944.98 crores. Compared to the previous year’s
level of reserves at Rs.517.95 crores and deposits at Rs.3263.50 crores, the growth in
the reserves and the deposits in the current year have gone up by 35% and 21%
respectively. The bank has earned a net profit of Rs.42.80 crores during 2007-2008
upto 29.2.2008.
The Tamil Nadu State Apex Cooperative Bank maintains a fund called the Primary
Cooperative Banks and the Tamil Nadu State Apex Cooperative Bank. The fund is
account. A special scheme was launched by Hon’ble Chief Minister Dr. Kalaignar to
rejuvenate about 1192 weak Primary Agricultural Cooperative Banks with the help of
this fund. Most of the societies in the above category had fallen dormant because of
lack of resources and had stopped lending and other operations. To help them to
restart lending, a special cash credit at the rate of Rs.20 lakhs per society is being
provided by District Central Cooperative Banks at a concessional rate of interest and
the difference between cost of funds and the concessional rate is being reimbursed to
District Central Cooperative Banks from out of this fund. It is expected that these
1192 Primary Agricultural Cooperative Banks through this scheme will resume their
by securing breakeven level of business and through this, will offer adequate
Primary Agricultural Cooperative Banks have been sanctioned with cash credit to the
tune of Rs.126.20 crores and the entire 1192 Primary Agricultural Cooperative Banks
There are 23 District Central Cooperative Banks in the State with 717 branches mostly
in rural areas to serve the Primary Agricultural Cooperative Banks and the rural
public. The District Central Cooperative Banks raise resources through public deposits
and also from Tamil Nadu State Apex Cooperative Bank and channelise them through
Primary Agricultural Cooperative Banks for agriculture and rural credit. In addition,
they meet the credit needs of dairy, handlooms, sugar and such other affiliated
cooperatives. They also lend directly to the public for non-agricultural purposes within
Primary Agricultural Cooperative Banks to the tune of Rs.1323.20 crores for crop loan
of which Rs.985.59 crores is from their own funds and Rs.337.61 crores from
(Rs. in crores)
Compared to the last year, upto February 2008 the amounts of deposit have increased
by 5.22%. Due to concerted efforts, better financial discipline and also adequate credit
flow through waiver, as per final audit of the year 2006-2007, out of 12 District
Central Cooperative Banks which were classified under Section 11(1) of Banking
Regulation Act with negative net worth, 7 District Central Cooperative Banks have
come out of this problem and it is expected that remaining 5 District Central
Cooperative Banks also will record positive networth and come out of Section 11(1)
by 31.3.2009. Efforts are being made to computerize all the branches of the District
In Tamil Nadu, there are 4474 Primary Agricultural Cooperative Banks which provide
credit to the farmers, distribute inputs like fertilizers and also run outlets under Public
Distribution System. These banks provide short term and medium term credit for
agriculture and allied activities. The short term loans are repayable within a period of
12 to 15 months and the medium term loans are repayable within 3 to 5 years.
Crop loan is the prominent item of credit to the farmers by Primary Agricultural
registered sugarcane growers and upto Rs.1 lakh in respect of other crops. The loan
amount exceeding this limit is secured with mortgage of property or pledge of jewels.
Primary Agricultural Cooperative Banks also issue loans for other agricultural
including loans for the purchase of consumer durables, housing loans, education loans
The details of the loans issued by these banks from 2004-05 are furnished below:
(Rs. In crores)
(As on (As on
26.3.2008) 29.2.2008)
Considering the importance of increasing credit flow into the agriculture sector,
Government has reduced the interest rate for the crop loans from 9% to 7% per annum
from 2006-07, the interest differential being compensated by the Government. For the
year 2006-07, Rs.18.28 crores was released and a sum of Rs.15.04 crores has been
released for the year 2007-08 to the cooperatives as compensation to make up this
interest subvention.
The Government is taking all efforts to inculcate the habit of financial discipline
reduction of interest from 7% to 5% for all crop loans being repaid promptly by the
The Government lays emphasis on the timely disbursement of crop loan in adequate
further proposed that the lending through Farmers Group will be encouraged by
forming Joint Liability Groups which will benefit the farmers to get additional
assistance by way of revolving fund to the tune of Rs.10 crores. This is expected to
benefit the farmers in a great way to consolidate themselves and pool their resources
in arranging their inputs supply, organizing cultivation activities and making joint
efforts in marketing to fetch a better price for their produce. Ultimately this will pave
way for consolidation of the farming activities by the farmers facilitating appropriate
Cooperative Bank which has been set up for the specific purpose of serving the
farmers in their respective operational areas. Though liquidation notices were issued
for 199 Primary Agricultural Cooperative Banks upto 2005-06, as a follow-up of the
announcement made in the year 2006-07 to revive them, all out efforts have been
made to revive them and bring them back to normalcy. The Government is happy to
inform that out of 199 banks, 197 banks have already been revived and an amount of
Rs.17.23 crores were issued as loans during 2006-07 to the members. During 2007-08,
Rs.13.07 crores were disbursed as loans upto 29.2.2008. The efforts of the
Government will continue for reviving the remaining two Primary Agricultural
Cooperative Banks.
Due to long years of neglect, several societies have been put into doldrums. The
pathetic status of some of the societies have forced them not to pay even the salaries to
their own employees for many months. Due to the efforts made by this Government,
the condition of many of the societies have appreciably changed. Due to initiatives
such as waiver of agricultural loan, revival of societies through the assistance from
distribution system and through various other measures, the business of the societies
have improved and the non payment of salary has been brought down significantly.
The Government will continue its efforts to ensure that all the societies become
financially viable and no employee in any of the societies goes without salary.
from the public for issue of loans and were unable to refund the deposits on due dates
chronic problem continues then the confidence of the people will be shaken. This
Government have made all out efforts to ensure that the depositors credibility is
restored and their matured deposit amount with the interest is paid back to them. In
30.6.2006 due to be refunded to the depositors. A promise was made in the Assembly
that efforts will be taken to settle these deposits at the earliest. Due to the initiatives
This Government considers that Primary Agricultural Cooperative Banks are the
marketing and extension can be delivered to the farmers. Recognising the importance
will actively collaborate with Agriculture Department and the Research &
Development organisations and provide all inputs and services under one roof.
The Primary Agricultural Cooperative Banks will also act as Paddy Procurement
Centres on behalf of Tamil Nadu Civil Supplies Corporation and will procure paddy at
the minimum support price announced by the Government in the non delta areas apart
from Direct Purchase Centres operated by Tamil Nadu Civil Supplies Corporation.
Primary Agricultural Cooperative Banks will also assist the Cooperative Marketing
produce directly from the farmers. Primary Agricultural Cooperative Banks will
expand their produce pledge loan operations substantially to prevent distress sale by
the farmers during peak harvest. A target of Rs. 100 crores will be set for disbursal
under produce pledge loan by Primary Agricultural Cooperative Banks in 2008- 09.
Most of the Primary Agricultural Cooperative Banks are operating under manual
system of record maintenance and face a serious threat from the new generation banks
using latest banking technology to penetrate the rural areas. To counter such threat,
state-of-art banking technology will be introduced and all the Primary Agricultural
Long Term Cooperative Credit Structure consists of Apex Bank viz., Tamil Nadu
Cooperative State Agriculture and Rural Development Bank, Chennai and 180
These credit institutions are providing investment credit to the members for activities
like minor irrigation, horticulture, plantation crops and other agriculture and allied
sectors.
(i) Tamil Nadu Cooperative State Agriculture & Rural Development Bank
(TNCSARDB)
The Tamil Nadu Cooperative State Agriculture and Rural Development Bank raises
the funds necessary for its lending by floating ordinary and special development
debentures. As the National Bank for Agriculture and Rural Development refinance
could not be availed from 2004, due to National Bank for Agriculture and Rural
State Agriculture and Rural Development Bank could not make available required
loans for Non-Farm Sector using its own resources. As on 29.2.2008, the share capital
of the Bank stood at Rs. 40.29 crores and reserves Rs.566.10 crores and deposits
There are 180 Primary Cooperative Agriculture and Rural Development Banks at
Banks provide long term credit for purposes like minor irrigation, land development,
Due to non-availability of refinance from National Bank for Agriculture and Rural
Development, the lending activity by these Banks is practically nil for the last four
years. During 2007-08, efforts were made to revive the activities of Tamil Nadu
Cooperative State Agriculture and Rural Development Bank and Primary Cooperative
of overdues in Non-Farm Sector. From 1.4.2007 till 29.2.2008, Rs.72.91 crores was
collected as against the overdue of Rs.278.43 crores under the Non-Farm Sector.
Further through waiver, an amount of Rs.42.45 crores each for the year 2006-07 and
2007-08 were released to the long term credit structure as waiver compensation. This
has increased the liquidity of both Tamil Nadu Cooperative State Agriculture and
Development Banks.
As a result, during 2007-08, the Primary Cooperative Agriculture and Rural
Development Banks have again started lending for the Non-Farm Sector including
Jewel Loans. The Government will make all efforts to revive them by arranging
refinance from National Bank for Agriculture and Rural Development during 2008-
09. Activities like horticulture, organic farming, hi-tech farming, precision farming,
plants, plantations in waste land and farm mechanization will be given priority under
The revival package for long term cooperative credit structure based on the
of India soon. In principle, the Government has already agreed to implement the
revival package. It is expected that the implementation of this package will help the
long term lending structure to wipe out the accumulated loss and to regain its position
Urban Cooperative Banks provide banking and credit facilities to urban and semi
urban population. As of now 120 Urban Cooperative Banks are functioning in the
State. They mobilize deposits from the public and extend credit facilities for specified
traders, artisans and persons belonging to low and middle income group for purposes
ranging from housing, business, education, consumer and other non-farm sector
activities. During 2007-08, they have issued working capital and term loans to the
extent of Rs.2144.29 crores. The deposit position in the Urban Cooperative Banks is
Rs.2592.29 crores as on 29.2.2008 compared to Rs.2448.19 crores as on 31.3.2007.
The Urban Cooperative Banks are expected to issue not less than 60% of their total
lending to priority sector and to ensure that at least 25% of the priority sector lending
Action will be taken to computerize all the branches of the Urban Cooperative Banks
The unprecedented move of the Government to waive the entire crop loan outstanding
in the Cooperative Banks as on 31.3.2006 have benefited lakhs of farmers to break the
debt trap besides giving a new lease of life to the cooperative credit institutions.
five equal instalments starting from 2006-07. So far waiver certificates have been
issued to 2281617 farmers. The amount released so far to compensate the waiver of
loan is as below:
(Rs. in crores)
t of India
NABARD 507.38 106.21 613.59 572.91 72.36 645.27
TNSC Bank 191.34 88.20 279.54 191.34 53.26 244.60
DCCBs 343.78 128.67 472.45 318.33 76.96 395.29
PACBs 172.43 60.78 233.21 215.92 66.13 282.05
TNCSARD 42.45 16.98 59.43 42.45 11.66 54.11
B
Total
1269.67 404.37 1674.04 1347.89 282.49 1630.38
Following this path breaking efforts of the Government of Tamil Nadu, the
waiver to the extent of Rs.60,000 crores during 2008-09 budget. This laudable
initiative taken by the Government of India to redeem the farm sector from the
that this loan waiver announced by the Government of India will be fully extended to
Tamil Nadu and the amount released already by the Government of Tamil Nadu as
loan waiver will be fully compensated by the Government of India on the eligible
components.
The crop loan has been extended with the concessional rate of interest by reducing the
effective rate of lending from 9% to 7% with effect from 2006-07. Further to imbibe
the discipline of better repayment among the farmers, the Government of Tamil Nadu
has ordered to give further interest subvention @ 2% from 2007-08 so that the
effective rate of lending of crop loan to the farmers who are prompt in repaying the
loans will be 5%. During 2008-09 budget, the Government have further reduced this
outstanding non-farm sector loans as on 31.3.2001 availed from the cooperative credit
institutions besides completely waiving the penal interest as a one time measure to
wipe out the overdues. Under this scheme, the borrower has to remit 25% of the
outstanding and avail the concessions extended and pay the remaining 75% within the
stipulated period. In order to encourage the repayment, the scheme which originally
ended on 31.3.2007 extended upto 31.3.2008 under various spells. Under this scheme
upto 29.2.2008, 113252 beneficiaries availed the scheme and paid the dues. The
benefit to the extent of Rs. 96.02 crores were passed on to these beneficiaries.
The cooperative banks issue loans on the pledge of jewels both for agriculture and
non-agriculture purposes. The jewel loans are more popular among the public and
banks are more secure and borrowing is hassle free for the beneficiaries. During 2007-
The Kisan Credit Card Scheme is being implemented to provide timely credit to the
Primary Agricultural Cooperative Banks have issued Kisan Credit Cards to 17.13 lakh
farmer members.
The Primary Agricultural Cooperative Banks are paying special attention to meet the
credit needs of weaker sections. NABARD has stipulated to extend not less than 30%
of short term lending by cooperatives to small farmers who own or cultivate less than
5 acres. Further, it is targeted to extend 14% of the quantum of loan issued under short
term loans and 30% under medium term loans to the members belonging to Scheduled
The District Central Cooperative Banks and Urban Cooperative Banks are
implementing this unique scheme to benefit marginalized small and petty merchants
and street vendors engaged in the business of selling flowers, vegetables, fruits and
running petty shops. They are the most vulnerable group for exploitation by usurious
money lenders. Their credit requirements are very small but critical. This scheme
which was launched by this Government has been amplified and streamlined over the
years. Under the scheme the loan amount upto Rs.5000/- is being provided without
any security. It is proposed to improve the scheme further by issuing credit card to
such beneficiaries and organize them as a self help group. During 2007-08 upto
29.2.2008, a sum of Rs. 27.79 crores has been issued to 67288 beneficiaries. It is
Lending through self help groups is considered extremely effective to ensure financial
inclusion. It is also beneficial to the banks in terms of better repayment and lower
lending is extended through self help groups. During 2007-08, cooperative institutions
have issued loans to the tune of Rs.170.13 crores to self help groups upto 29.2.2008. It
loans upto Rs.10 lakhs repayable in 60 monthly instalments at 12% interest to women
entrepreneurs to start small industries and to take up service activities. During 2007-
08, a sum of Rs.9.96 crores has been disbursed to 4848 women entrepreneurs till
29.02.2008.
Under this scheme, the District Central Cooperative Banks and Urban Cooperative
Banks are issuing loans upto Rs.1.00 lakh at an interest rate of 12% per annum to
As many as 5063 women beneficiaries were benefited to the extent of Rs.11.81 crores
Cooperative credit institutions are issuing maternity loan to pregnant women upto
Rs.2000/- at an interest of 11%. During 2007-2008, a sum of Rs.0.39 crores has been
The District Central Cooperative Banks are extending professional loan to doctors and
engineers upto Rs.10 lakhs at an interest rate of 12% per annum. This loan is
In order to enhance the borrowing power of SC/ST members, interest free share
capital loan is provided every year. During 2007-08, a sum of Rs.20 lakhs have been
It is proposed to continue the same and during the year 2008-09, a sum of Rs.20.00
Cooperative Banks @ Rs.250 per member and a sum of Rs.5.00 lakhs will be
provided to 1000 SC/ST members of Urban Cooperative Banks @ Rs.500 per member
The borrowing power of the members in the cooperative banks needs to be enhanced.
This inevitably requires adequate step up in the share capital. Considering the poor
sections, the Government is providing interest free share capital loan as the normal
The details of the share capital assistance provided during 2007-08 are furnished
below:
(Rs. in lakhs)
individual
1. Primary
Agricultural
Rs.500/- 2000 10.00
Cooperative
Banks
2. Primary
Cooperative
Agriculture and
Rs.1000/- 500 5.00
Rural
Development
Banks
3. Urban
Banks
4. Loans to
physically
Rs.500/- 1000 5.00
handicapped by
It is proposed to extend the scheme of interest free share capital loan to the women
Agriculture and Rural Development Banks and Urban Cooperative Banks and
issue interest free share capital loan to 2000 women members of Primary Agricultural
Cooperative Banks at the rate of Rs. 500/-, five hundred women members of Primary
Cooperative Agriculture and Rural Development Banks at the rate of Rs. 1000/- and
thousand women members of Cooperative Urban Banks at the rate of Rs. 500/- and
1000 physically handicapped persons at the rate of Rs. 500/- through the above banks.