It seems the ruling United Progressive Alliance government at the Centre is seriously considering undertaking social banking reforms. It has agreed to implement the report of the A Vaidyanathan committee, set-up by the Union government, on the revival of cooperative credit institutions. The Union ministry of finance has accepted the report in principle and promised to ensure the availability of a huge Rs 15,000-crore bailout package (including a Rs 4,000-crore contingency grant) for the purpose.
The reforms recommended by the report include depoliticising the cooperative credit structure by removing state control in its functioning, merger of unviable primary agricultural credit societies and grant of assistance only for viable units. To bring in long-term fiscal discipline in the cooperative credit structure (CCS), a minimum seven per cent of capital to risk weighted assets ratio is prescribed. The committee insists on ending the reign of the registrar of cooperative societies over CCS and on bringing CCS directly under the regulation of the Reserve Bank of India. Vaidyanathan says: "We want to end all the problems once and for all.' But implementation of the recommendations might not be smooth, as most states don't support it.