The Reserve Bank of India (RBI) has directed banks with currency chests to ensure adequate cash supply to district cooperative central banks (DCCBs), regional rural banks (RRBs) and rural branches of all commercial banks, including RRBs, in an effort to make cash available to farmers ahead of the rabi sowing season.
The the central bank said in a notification on Tuesday. that branches of banks located in APMCs may be given adequate cash to facilitate smooth procurement.
The regulator estimated that around Rs 35,000 crore would be needed by the district co-operative central banks for sanction and disbursement of crop loans to farmers, at a rate of Rs 10,000 crore per week.
“NABARD would be utilising its own cash credit limits of up to about Rs 23,000 crore to enable the DCCBs to disburse the required crop loans to PACS and farmers,” the central bank said in its notification.
The announcement came after a day after the apex bank decided to relax cash withdrawal norms for traders registered with APMCs. These farmers can now withdraw as much as Rs 50,000 per week, similar to any current account holder.
Also, a cooperative bank union in Maharashtra had earlier reportedly written to the RBI claiming that commercial banks refused to provide currency support following demonetisation restrictions.
The union had said while the earlier limit of Rs 10,000 was applicable to other customers, it was not applicable to cash withdrawal by co-operative banks.
On Monday, officials from the RBI, NABARD and various banks met officials from the finance ministry and were directed to make adequate cash available with the cooperative banks through currency chests attached to them, as most cooperative banks do not have their own currency chests.
After taking stock of the situation in the rural sector, the government also directed lenders to give these cooperative banks complete access to their deposits in commercial banks to meet their cash requirements.
According to a public sector bank chief who attended the meeting, the government expressed concerns that enough cash was not flowing to the rural sector.
“Especially, the cooperative banks’ customer base consists of several farmers who at present need the money on account of the seasonal requirement,” he said, adding that banks were told farmers must get their money to pay for labour and purchase seeds.
Another senior banker said while chests are already providing cash to the cooperative banks, the government has asked banks to step up their efforts so that rural customers have better access to their deposits.