ADB to give $1bn loan for India's co-op credit system
Monday, 11 December 2006, 18:30 IST
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New Delhi:The Asian Development Bank (ADB) will lend $1 billion to India for improving cooperative credit structure and helping the rural poor. This is the biggest regular loan ever by the Manila-based multilateral body. Established by the government in 1904, India's cooperative credit structure has evolved into one of the largest rural finance systems in the world, underpinning the broader cooperative movement in India. The loan comes from ADB's ordinary capital resources and carries a 15-year term, including a grace period of three years, an official ADB statement said Monday. Interest on the loan will be determined based on ADB's LIBOR-based lending facility. With the banking division of the finance ministry as the executing agency, "the Rural Cooperative Credit Restructuring and Development Program will address the problems faced by farmers by undertaking a comprehensive reform of the cooperative credit structure", said ADB. The German Bank for Reconstruction and Development, which has worked with ADB in designing the project, will provide parallel financing of 140 million euros ($184.8 million). The British government through the Department for International Development (DID) will provide a $2 million grant for technical assistance for performance monitoring, capacity building in local implementation units, and introducing innovative schemes to improve credit outreach to poor rural women. "The weaknesses of the cooperative credit structure have immense adverse economic, social, and political impacts on the rural sector," said Kunio Senga, Director General of ADB's South Asia Department in the statement. "Its reform is critical to rural transformation because it has an all-India membership base of 135 million and has links to the broader cooperative movement comprising processing, marketing, input distribution, dairy, and weaving," said Senga. The project will be carried out in Andhra Pradesh, Madhya Pradesh, Maharashtra, Rajasthan, and either Gujarat or Orissa to tackle a major factor behind India's agriculture sector's declining growth: limited access to credit for the farmers. The program will revitalize the cooperative credit structure, part of the mostly state-run rural finance system, to reach out to the masses of small farmers more effectively. The credit structure currently suffers from poor governance, weak portfolio management and recurring losses. The reform aims at enhancing the legal, regulatory and governance framework to ensure members control over the cooperative credit structure and facilitating effective enforcement of prudential norms. A Department of Cooperative Revitalization and Reform has already been established at the National Bank for Agriculture and Rural Development (NABARD) to support the reforms, and a national implementation and monitoring committee constituted to oversee the process. State-level and district-level implementation committees are also being established.
Source: IANS
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