The Jagadish Capoor report had earlier called for recapitalisation of cooperative banks. The Centre has noted that cooperative banks have a good rural network and are responsible for about 60 per cent of farm credit disbursement, and that their recapitalisation is also crucial. As the recapitalisation scheme has not been taken up in time, the National Cooperative Union of India has said the amount needed for recapitalisation of these banks has now increased to Rs 10,000 crore. In absence of recapitalisation scheduled state cooperative banks are finding difficult to abide by the 5.5 per cent cash reserve ratio stipulation of the central bank.
The union has pointed out that despite stiff competition from nationalised and private sector banks, cooperatives still continue to share a major portion in priority sector lending, including agriculture. The across-the-board loan waiver scheme like ARDR introduced during 1989-90 had inflicted a great loss on cooperatives. While the government promptly settled the claims of commercial banks in regard to ARDR loans by way of recapitalisation, the affected cooperatives were left out, shooting up their loss. In light of this, the government should immediately formulate a recapitalisation package worth Rs 10,000 crore for cooperatives. The National Cooperative Bank was set up as an apex multi-functional balancing centre for district central banks and urban cooperative banks.