The state has sought the approval of the Reserve Bank of India (RBI) and the National Bank for Agriculture & Rural Development (Nabard) to launch the scheme. The top officials of RBI and Nabard will be meeting in Mumbai on February 22 to take a decision on the scheme. The state co-operative minister Arabinda Dhali told The Financial Express that the co-operative banks in Orissa have been saddled with about Rs 350-crore worth of non-performing assets. "We expect to recover at least Rs 125-crore by implementing the scheme", he said. According to him, nearly 22 lakh poor and marginal farmers and artisans who have defaulted would be benefited by this scheme.

The scheme would be in line with RBI's one time settlement guidelines for the nationalised banks. The minister said that the government would give an opportunity to the defaulters to pay back the amount. It would also waive a portion of the interest, he added.

The government, in fact, has acted on the suggestion of Mr Ashok Das, state president of Janata Dal (Secular), who is also a veteran legislator. Mr Das, in a letter to the chief minister, had proposed that the government should introduce a one-time settlement scheme to recover the bad debts.

The state government, meanwhile, has suggested the Nabard to directly finance the primary agriculture cooperative societies instead of channelising the fund through the Orissa State Cooperative Bank and district central cooperative banks, which would only in effect increase the lending rate. Even though the Nabard is providing the fund at 6.5 per cent interest, the beneficiaries are getting it at a staggering 18 per cent rate because of the three tier system, it pointed out.

Nabard seems to be reluctant to switch over to the direct finance system as it would involve huge administrative work to deal with lakhs of primary agriculture cooperative societies in the country. There are about 3000 such societies working in Orissa.

However, Mr Dhali said, the bank has agreed to introduce direct financing to the primary agriculture cooperative societies in some states, including Orissa, on experimental basis.

Regarding the revival of the cooperative agriculture & rural development (CARD) banks, the minister said that a solution has been worked out with Nabard for opening of the credit line. The CARD banks would pay Rs 20 crore to Nabard towards the outstanding amounts to get the refinances.The cash-rich Cuttack Urban Cooperative Bank has agreed to lend Rs 20 crore to the CARD banks for the repayment. The process, however, is getting delayed, as the urban bank is insisting that the Orissa government should provide the guarantee cover for the amount, the minister said.