In a draft document prepared for submission to the Union finance ministry, the cooperative banks stated that there is a strong case for policy support measures and one-time financial support for recapitalisation of cooperative banks. Only after proper recapitalisation, they will be in a position to reach a minimum of 8 per cent capital to risk-weighted assets through the prescribed capital adequacy norms over a period of five years as suggested by the Narasimham committee.

The Union agriculture ministry, in this context, has estimated that the recapitalisation of cooperative banks will require about Rs 7,000 crore.The cooperative banks have also decided to urge the finance ministry to bring aboutsuitable amendment in the Banking Regulation Act to facilitate use of licence by RBI for the operationalisation of the National Cooperative Bank of India (NCBI). The operation of NCBI as an apex body of cooperative banks will help in boosting the working of state, district and primary cooperative banks.

B S Vishwanathan, chairman, NCBI and the National Cooperative Union of India (NCUI) told The Financial Express that the entire cooperative movement in the country will stand behind the demands of the cooperative banks.

The cooperative banks in their draft memorandum has stated that total credit flow from institutional sources in rural sector is estimated to go up from Rs 30,375 crore in 1997-98 to Rs 60,842 crore in 2001-02 and the cooperatives will have a dominant share of over 60 per cent. Hence, the cooperative banks should be freed from excessive government controls necessary for functioning as professional enterprises, while the policy support to the sector should continue. The existing dualcontrol over cooperative banks should be eliminated as suggested by the Narasimham committee.

The memorandum stated that though the Narasimham Committee in its first report had not covered cooperative banking sector, the RBI made several of the recommendations applicable to cooperative banks including cooperative agriculture and rural development banks on issues of provisioning norms and classification of NPAs.

The second report of the Narasimham committee has, however, made certain references about the cooperative banks under the chapter, `Rural and small industrial credit'. But the memorandum cautioned that if the recommendations of the second report is to be implemented in toto, this will have serious impact on cooperative credit structure. The memorandum stated that the suggestion that all regulatory and supervisory functions over rural credit system should vest with the proposed board may be considered if the cooperatives are well recognised as part of the main stream banking sector. However, thisrequires redefining the future role of Nabard.