A Cooperative Time-Bomb

In Ahmednagar in Maharashtra, the heartland of the sugar movement, political whims and natural calamities have created a precarious credit situation

- Monica Bathija

Satish Shinde is one of those rare farmers who hasn’t taken an agricultural loan in the past couple of years. With some deft management, the 40-year old resident of Dhanore village in Maharashtra’s Ahmednagar district has managed to turn things around for his seven-acre farm.

Shinde, who is a member of both the local credit society and the Vithalrao Vikhe Patil Cooperative Sugar (VVPCS) Factory, the first sugar cooperative in Maharashtra, has bank accounts at the State Bank of India, Yes Bank, and the Ahmednagar District Central Cooperative (ADCC) Bank. Even as directions have been placed by the Reserve Bank of India on at least five cooperative banks in the past two years—the latest being on the Punjab and Maharashtra Cooperative Bank last month—he is fairly confident of his deposits at the ADCC. Instead, Shinde chose to withdraw his money from Yes Bank after he heard about the concerns over its ill-health.

The ADCC Bank has 1,484 Primary Agricultural Credit Societies affiliated to it and 287 branches across the district. The sugar cooperatives have been the backbone of the economy here, with farmers, sugar factories, cooperative banks and politics closely intertwined in the development of the region.

“Fifty percent of the economy here is related to sugarcane,” says Raosaheb Varpe, CEO of ADCC Bank, which finances the credit societies as well as gives loans to sugar factories. Farmers are members of the credit societies, while the societies and sugar cooperatives have to become cooperative bank members to avail loans. The third tier in the rural banking structure are the state cooperative banks, which are refinanced by the National Bank for Agriculture and Rural Development (NABARD).