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Our Bureau

New Delhi , Dec. 16

THE Cabinet has cleared a Rs 13,596-crore revival package for revitalising the short-term rural co-operative credit structure in the country.

The financial package would be available to rural credit institutions for wiping out their accumulated losses, to increase their capital to a specified minimum level and for covering invoked but unpaid and uninvoked guarantees given by the State governments.

The Government hopes that the package would enable Primary Agriculture Cooperative Credit Societies (PACS) to increase their capital adequacy to seven per cent, while the ratio would be raised to nine per cent within three years.

The funding would be shared between the Centre, the State Government and the credit institution. While 68 per cent (Rs 9,245 crore) would come from the Centre, 28 per cent would be borne by the State and the rest four per cent by the respective institution.

The Cabinet has said that the magnitude of the funding would be determined on the basis of the findings of a special audit.

The Union Government will provide its share as a grant, while States are expected to meet their share for their budget or by open market borrowings in addition to their current borrowing limits. The Centre has said that it would also consider assistance on more liberal terms for special category States and for specified scheduled areas and tribal areas to meet their liability under the package.

The indicative yearly break-up of the Centre's share would be Rs 400 crore in 2004-05, Rs 3,000 crore in 2006-07, Rs 5,000 crore in 2007-08 and Rs 845 crore in 2008-09.

The eligible institutions are PACS with at least 30 per cent recovery of their outstanding loans as on June 2004. For PACS with recovery levels of 50 per cent, capitalisation would be in full, while for those between 30 per cent and 50 per cent recovery financial assistance would in three annual instalments at the beginning of each succeeding year subject to their achieving an incremental increase in their recovery rate by at least 10 per cent on June 30, 2006, and an annual increase of 10 percentage points thereafter.

As and when a PACS achieves 50 per cent recovery, the entire assistance should be released without waiting for the year-to-year recovery benchmarks.

The Government has said that financial assistance under the package would be released only in the implementation of the recommendation of legal and institutional reforms.

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