Mr. Subrahmanyam is the Chair of the International Cooperative Banking Association (ICBA) and President of the National Federation of State Cooperative Banks (NAFSCOB), India

Congratulations on being elected as the Chair of ICBA! From your vantage point as head of NAFSCOB, one of the important banking federations in the region, how would you rate the performance of the credit and banking sector in the region?

The overall performance of the Credit & Banking Sector or institutions in the short-term rural cooperative credit, in spite of certain regulatory and supervisory controls and constraints, over the past few years, has been impressive in the Region. The credit flow to cater to the needs of the farmers, has been in absolute figures is on the increase. While the share of cooperatives in agriculture lending appears to be declining but the quantum of lending has been increasing in absolute terms. The sector is well poised to contribute to achieve the Government of India’s vision & mission of ‘doubling of farmers’ income’. In fact, loans and advances by State Cooperative Banks (SCBs) and District Central Cooperative Banks (DCCBs) amounted to around Rs.1,50,000 crores and Rs.3,00,000 crores respectively, as on March 2019 - a creditable performance.

It is encouraging to note that 29 out of 33 SCBs and 320 out of 363 DCCBs have complied with capital adequacy ratio (CRAR) norms by achieving more than 9% CRAR. The assets quality of rural cooperative banks has been on the increase. All SCBs and 363 DCCBs have fulfilled the norms for grant of license. SCBs mobilized deposits to the tune of around Rs.1,35,000 crores, and DCCBs mobilized deposits to the tune of Rs.3,78,000 crores.

The financial performance of the Rural Credit and Banking (RCB) sector in terms of share capital, reserves, net owned funds, etc., has been depicting an increasing trend. The gross non-performing assets (NPAs) as percentage of gross loans outstanding, as on 31 March 2019 of SCBs has been less than 5 %. It is a matter of great satisfaction that even the Maharashtra SCB reports net NPA of 0% for the first time in 109 years. However, there are certain issues concerning the sector which needs attention and they pertain to governance and structure. The absence of democratically elected Boards of Management and of freedom for functional autonomy are major issues which restricts development of member driven cooperatives. This discourages leadership development efforts. This is due to direct interference of respective governments. Efforts towards restructuring in the name of delayering of well-conceived three tier cooperative structure is a major concern to rural credit and banking sector. The developments towards ‘unjustified’ mergers weakens and destabilizes the rural cooperative credit structure and raises about their future. The performance of the rural credit and banking sector tend to be better placed in the absence of direct interference of Government, Regulatory & supervisory agencies.

What has been your association with the ICA-AP Credit and Banking Committee? How do you visualize its role? 

The erstwhile RCBA, part of ICA-AP, with dynamic leadership, played a significant role in adding fairly a good image to ICA-AP till 2010. RCBA maintained closer contacts with the existing important credit and banking federations. My association and association of NAFSCOB with RCBA and with the present committee has been active and participative.

I visualize an important role to this ICA-AP Credit and Banking Committee. ICA-AP is the only region which has set up a Credit and Banking Committee. Hence, the office of ICA-AP should review the contribution of ICA-AP Credit & Banking Committee over the last one decade and take measures to make it more visible, vibrant and meaningful.

Excellent! ICBA members are very sensitive, emotional, philanthropic, cooperative and more responsive.  Almost all members of ICBA have initiated measures both in cash and kind to help contain the spread of COVID-19 in their respective countries. ICBA members supported by their regulatory authorities availed the advantages of regulatory measures to continue to carry out banking operations, lending operations, offer moratorium on loans, etc. I place on record the excellent contributions of many ICBA members, particularly NAFSCOB, NCUI, NAFCUB, NCDC, TSCA Bank, Karnataka SCB in India, Samabaya Bank in Bangladesh, SANASA Federation in Sri Lanka, KUSCCO in Kenya, MASS-SPECC Coop Development Centre of Philippines, National Cooperative Council of Poland, EACB from Belgium, and DGRV of Germany. Various important measures have been taken at the European level as reported by Confederation Nationale Credit Mutual, France, one of the members of ICBA. The positive response of ICBA members is a continuous and ongoing process. They are committed to contribute by all means to contain the spread of COVID-19 pandemic.

How do you see the landscape changing for cooperatives, especially credit and banking in the post COVID world?

Cooperatives, especially credit and banking coops, have the ability and willingness to show their commitment and perseverance to help even post COVID-19. Taking into account that cooperative banks are very close to their members, customers and local cooperative societies, RCBs play a special role in stabilizing economy. Liquidity positions, which have impacted the sector due to the spread of COVID-19 have been addressed well.

RCBs, federal in character, will be able to absorb and balance the inevitable losses in the structure to carry out their operations uninterrupted. With the kind of stimulus provided by Government of India under Atma Nirbhar Bharat Package, the rural cooperative sector will be able to address the adverse implications of COVID-19. As has been rightly observed by ICA President Ariel Guarco, “Cooperation is not only for emergencies, cooperation is the alternative way to build a fairer, more balanced and, fundamentally, less fragile economy in the face of global challenges such as the pandemic”.

The cooperative banking structure was unaffected by the financial crisis of 2008 due to their ‘inbuilt’ characteristics. The cooperative credit and banking sector will continue to influence rural households irrespective of the structural changes even during post COVID-19. The cooperative credit and banking institutions will work to ensure adoption of technology, digitalization, formulation & compliance of risk management guidelines, information security guidelines, cyber security, fraud monitoring guidelines, etc. The sector will also be in a position to concentrate on the important pillars of corporate governance namely accountability, transparency, responsibility and fairness. The agriculture loan portfolio will continue to be unaffected due its large rural network and well-established structure. The landscape of Indian rural cooperative credit and banking structure will continue to be mostly three tiers in bigger states and two tiers in smaller states. Any effort to destabilize the well-conceived 3 Tier rural cooperative credit structure will be construed as a deliberate attempt to weaken the cooperative credit structure. The structure will make all efforts by building their capabilities to prevent them from being unhealthy, unviable and undemocratic.

What actions would you recommend credit and banking cooperatives take to optimize on opportunities emerging from the COVID-19 crisis?

There are both challenges & opportunities before RCBs: COVID-19 created such an impact on the rural credit and banking cooperative structure restricting their capabilities to continue to contribute to ensure agriculture/farming operations. Hence NAFSCOB and their members impressed upon the policy, promotional, development, supervisory and regulatory agencies to help formulate appropriate policy frameworks and announce regulatory and refinance packages to cope with the situation emerging out of the spread of COVID-19. They are as follows:

• Policy initiatives include continuation with 2% Interest Subvention to banks and 3% Prompt Repayment Incentive to farmers for the extended period of repayment of short term crop loans up to date of actual repayment. This arrangement is to ensure that farmers do not have to face the situation of paying penal interest and they continue to get the benefit of short-term crop loans at a concessional interest rate of 4% p.a., which is applicable on timely repayment of the short-term crop loan of up to INR 3 lakh per farmer, given by Banks @7% p.a. which have fallen due or shall fall due between 01.03.2020 and 31.05.2020.
• Regulatory Package: The Reserve Bank of India (RBI) has announced a regulatory package in order to mitigate the burden of debt servicing brought about by disruptions on account of COVID-19 pandemic and to ensure the continuity of viable businesses. The regulatory measures include ensuring the continuity of viable businesses such as a) Rescheduling of payments wherein the cooperative banks are also permitted to grant moratorium of three months on payments of all instalments falling due between March 01,2020 to 31 August 2020; b) Classification of Special Mention Account (SPA); and c) Non Performing Assets, d) the additional measures for liquidity management, Refinancing Facilities to All India Institutions, Asset Classification and other related issues. RBI announced Special Liquidity Facility (SLF) for a total amount of Rs. 25,000 crore to National Bank for Agriculture and Rural Development (NABARD), to enable them to meet the refinancing needs of Cooperative Banks. RCBs ensured that their branches in rural areas, especially those located in mandis (local markets) and other market areas function normally with adequate staff, cash and other facilities, to ensure that the Primary Agricultural Credit Societies (PACS).

These measures helped RCBs enhance their preparedness and to be well poised to meet challenges or any eventualities likely to be caused by the spread of Pandemic COVID-19. These measures facilitated optimization of opportunities to ensure continuation of farming activities and also banking transactions. RCBs will have to optimize on available opportunities and take swift action to address the sectoral needs of MSMEs to release emergency credit facilities and also additional credit through Kisan Credit cards as a part of stimulus provided under Atmanirbhar Bharat package, Government of India.

How do you see ICBA’s role going forward?

A big Challenge. Please allow me to take a little longer time to explain about this sectoral organization which actually was started as a committee in 1922. Let me also at the outset appreciate, congratulate and extend gratitude to the President and Board of Directors of ICA who recognized the potentiality of the excellent sectoral organization of International Cooperative Banking Association (ICBA). It appears that the ICA Board was, rightly, reluctant to discontinue ICBA, though it was allowed to be inactive for about a decade. Someone within the ICA circle commented that ICBA was in ‘coma’, for a decade. The firm decision of ICA Board taken in 2018, to revive ICBA was effectively implemented on 12 October 2019 at Kigali, Rwanda. The ordinary members meeting has been convened, Board was elected and president of ICBA was elected. Recalling this background becomes necessary to understand that the work needed to be commenced from “scratch”, as no concrete information about “work Done” has been made available to the new President, ICBA. Fortunately, I have been associated with ICBA since long as an ordinary member of ICBA. Therefore, it helps to revive and activate this important sectoral organization.

ICBA has more challenges to address. It has excellent potential and capabilities to perform. Looking at the work done and or one may say the activities carried out within the first eight months, it may be concluded that ICBA will be a force to reckon with in the future and will prove to be an asset to ICA. Three Board meetings within less than six months, providing exposure to four international seminars /meetings/events, the launching of a first ever website for ICBA, enrolment of nearly 14 members in ICBA, are few examples to demonstrate the renewed effectiveness. I do not think any other sectoral organization of ICA has had such achievements. One of the biggest challenges is to ensure active participation of all 42 members representing Cooperative Banks and Cooperative Financial Institutions. The constraints being faced due to the wide spread of COVID-19 has not deterred ICBA from continuing efforts, online, to involve members in sharing and caring. ICBA has succeeded to some extent. These efforts also aimed to work out strategies to contain COVID-19. ICBA also commissioned two major studies: Contribution of cooperative banks in Sustainable Development Goals and Financial Cooperatives. ICBA will continue the fundamental role to facilitate and encourage the exchange of information amongst members on key cooperative banking issues and foster inter-cooperation in the finding of solutions. ICBA will also ensure the financial stability of cooperative banks /financial cooperatives to carry out their credit and banking activities. Further, we envisage an effective and positive role in addressing the different aspects of regulatory, technological, credit delivery channels, digitalization, computerization, fraud monitoring systems, etc.

ICBA looks forward to establishing contact with all regional offices of ICA, and also different sectoral associations, aimed to ensure sound financial stability of cooperative banks and financial cooperatives. ICBA also looks forward to better coordination with European Association of Cooperative Banks (EACB) to work towards strengthening of cooperative banks in Europe. Finally, I say, I envisage a very positive role to ICBA to face challenges post COVID-19.