'Supervisory body for coop. banks under study'

By Our Special Correspondent

NEW DELHI, APRIL 19. Reacting to the slack season credit policy unveiled by the Reserve Bank, the Union Finance Minister, Mr. Yashwant Sinha, today said the Government would examine the suggestion for setting up an apex supervisory body for cooperative banks. These banks had recently come into the limelight for alleged slack supervision during the build-up to the stock market crash.

Mr. Sinha felt that ``in the given situation they have done a very competent job'' and he was particularly encouraged by the apex bank's preference for further softening of interest rates during the course of the year.

He hoped that the other policy-making arms of the Government and the industry would be able to create such an environment. The liberalisation of prime lending rates, reduced interest rate on export credit and permission to banks to offer higher interest rates held by senior citizens were described as steps in the right direction.

The industry also echoed Mr. Sinha's sentiments, although some industry associations nurtured reservations. The President of the Associated Chambers of Commerce and Industry of India (Assocham), Mr. Raghu Mody, said the overall thrust of the policy was welcome. However, in view of the economic slowdown, the apex bank's intention should have been matched by lowering of bank rate by at least one per cent and the export credit rate could have been reduced further, perhaps in line with India's competitors. He said needy borrowers such as SSIs and medium scale units were not getting adequate finance from banks. The RBI should ensure that the accepted recommendations of the Nayak and Kapoor Committees are meticulously followed and an effective monitoring mechanism is evolved. Perhaps, the Central Bank could have suggested a floating rate of interest for these units, he felt.

While noting the multiplicity of institutions pursuing the same objective, the Assocham chief said the suggestion by the RBI for creating one more body - an apex supervisory body for cooperative banks - will hardly help. The RBI, by its own admission, is opposed to duality of control between RBI and State Governments and, therefore, Mr. Mody wondered at the justification for setting up another jumbo body.

FICCI hails policy

The Federation of Indian Chambers of Commerce and Industry (FICCI) too was in broad agreement with the thrust of the policy. While welcoming the RBI's decision to fine-tune bank advances against shares, the FICCI felt the regulatory and monitoring mechanism should be strengthened rather than checking the flow of funds to the capital market

The Confederation of Indian Industry (CII) said the Reserve Bank had adopted a balanced approach in tackling the current market situation. The CII President, Mr. Arun Bharat Ram, hoped the RBI would, in future, allow financial institutions to fund overseas operations and acquisitions of Indian companies, raising the foreign equity limit for banks and provide greater autonomy to bank management, especially in recruitment policies.

The exporters said steps to lower the cost of export credit and rationalisation of the refinance package were welcome. But they would have been happier if the RBI had linked export credit rates directly to bank rates as requested by the Federation of Indian Export Organisations (FIEO).

Send this article to Friends by E-Mail

Section  : National
Previous : Yashwant Sinha's legislative agenda put on hold
Next     : Rajnath Singh resigns from RS