Govt asks Punjab co-op bank to borrow money to pay NABARD
Unable to bail out Punjab State Co-operative Bank Limited from the setback of poor recovery of loans due to farm loan waiver, the cash-strapped Punjab government has asked the bank to borrow Rs 3600 crore to pay its instalment to NABARD. The amount of Rs 3600 crore, however, was to be paid by the state government that had promised to take over the short-term loans of 6 lakh farmers.
The bank, having 802 branches across that state, provides short-term crop loans to farmers. Since the bank was not able to recover the loaned money to repay Rabi instalment of Rs 3600 crore, it had sent a SOS to the state government for a bailout.
With its coffers empty and state being barely able to manage a Rs 2200 crore monthly bill of salaries, the government has virtually thrown its hands in the air and asked the co-operative bank to raise a loan from the National Cooperative Development Council, and repay NABARD. But the government has assured it would stand guarantee for the loan.
The issue came up for a discussion at a meeting of Finance Minister Manpreet Singh Badal with Finance Commissioner (Cooperative) D P Reddy, CMD of co-operative bank Dr SK Batish and CMD of Punjab State Cooperative Agriculture Development Bank HS Sidhu on Wednesday.
Government sources, however, said, “The government does not have any money. They have assured the co-operative bank to raise a term loan for now and the state would pay back the instalment. Chief Minister Amarinder Singh had to take up this issue with Union Finance Minister Arun Jaitley as we will need RBI’s sanction for this also.”A source added that they would get more clarity after hearing from the RBI, but till then the issue will stay a spot of bother for the government and the bank too. If the bank defaults on this instalment by July 31, it could pose a serious problem for the state.
“There has been a discussion that if the RBI denies permission, the government will spare some money from Rural Development Fund (RDF) for the bank to keep going,” said a government functionary.
The agri bank had also sought a fiscal help of Rs 150 crore from the government to repay NABARD.