As previously reported, the Reserve Bank of India (RBI) had significantly reduced food credit allocations, particularly affecting State Cooperative Banks (StCBs) in the Northeastern region. In a recent revision, the RBI has adjusted the share allocations for these banks, redistributing funds from other StCBs while capping their total allocation at Rs 41,000 crore for FY 2025-26.
Importantly, the International Year of Cooperatives is ongoing, emphasizing the need to promote the cooperative sector. However, allocations for State Cooperative Banks have been reduced due to an increase in the share of public and private sector banks. The share of public sector banks rose from 30.60% to 34.30%, while private sector banks increased from 48.39% to 52.96%, further impacting StCB allocations.
In total, Rs 12,194 crore has been cut from cooperative banks’ share, which could weaken their loan outstanding, gross NPAs, CRAR, and profitability, affecting financial stability.
The revised circular provides partial relief to some State Cooperative Banks in the Northeast. Assam State Cooperative Bank, previously reduced from Rs 1,100 crore to Rs 510 crore, has now been revised to Rs 835 crore. Similarly, Meghalaya StCB, which saw a cut from Rs 1,400 crore to Rs 560 crore, now has a fixed share of Rs 1,065 crore.
The Tripura StCB, earlier reduced from Rs 1,800 crore to Rs 850 crore, has now been revised to Rs 1,365 crore. Nagaland StCB has been adjusted to Rs 300 crore, up from Rs 250 crore, while Sikkim StCB, previously cut from Rs 500 crore to Rs 220 crore, now has Rs 380 crore.
Beyond the Northeast, Gujarat StCB and Chhattisgarh StCB have also received increased allocations. Gujarat StCB now has a total fixed share of Rs 6,080 crore, up from a previous reduction to Rs 1,550 crore, while Chhattisgarh StCB has been revised to Rs 1,670 crore from Rs 660 crore.
Similarly, Himachal Pradesh StCB now has Rs 2,810 crore, up from Rs 2,030 crore, while West Bengal StCB has been revised to Rs 3,570 crore, up from Rs 2,225 crore.
Despite these adjustments, many State Cooperative Banks have faced further reductions in their allocations. Kerala, Andhra Pradesh, Bihar, Jharkhand, Rajasthan, and Maharashtra StCBs have all witnessed declines in their fixed share allocations compared to previous limits.
Overall, the total allocation for 30 StCBs has been reduced from Rs 53,444 crore (FY 2024-25) to Rs 41,000 crore (FY 2025-26). This cut is expected to impact food credit operations, particularly in rural financing and procurement activities.
Meanwhile, Saraswat Cooperative Bank, the lone Urban Cooperative Bank (UCB), has been allowed to participate in the consortium with a fixed share of Rs 220 crore.
The revised allocations have been announced after representatives of State Cooperative Banks strongly raised concerns over the reduction in share allocations before NABARD, NAFSCOB, and other concerned authorities, seeking their support to address the issue.
