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Discussion » COVID-19 impact on the Cooperative Credit structure in Telangana (India); Resilience & opportunities

COVID-19 impact on the Cooperative Credit structure in Telangana (India); Resilience & opportunities

Impact of Covid in Telangana & Covid response

India is still a largely agricultural country with 65% of the population being dependent on agriculture. Agriculture production is characterized by fragmented production by smallholder farmers. As these smallholder farmers face difficulties in accessing credits through commercial banks, a lot of these farmers depend on the cooperatives credit structure for obtaining production credit. With about 100,000 cooperatives in India, the sector covers each and every village.

This is also the case in the state of Telangana, where the cooperative network consists of 389 cooperative bank branches, and 799 primary agricultural cooperative societies. As a result, cooperatives are very close to clients, and can help members mitigate part of the risks during crisis situations.   

Agriculture lean season

In Telangana, agriculture sector in general was only mildly affected by the COVID-19 outbreak; mostly due to the timing of the outbreak, as well as recent investments in irrigation. In recent years the area under irrigation in Telangana went up by 66% and agricultural production (specially paddy) had gone up by 99%. When Covid-19 hit the country in March 2020, most farmers had completed harvest of their record-breaking production. For incidental cases where harvest was incomplete and farmers faced difficulties in marketing & logistics, government provided financial support, and cooperatives organised procurement. As a result, for most farmers the effects of COVID-19 were limited during the initial period.

Rural Agricultural Cooperatives in India are predominantly agriculture lending institutions and more than 85% of the loans are given as agricultural credit only.  As the Covid-19 has not much affected the agricultural sector, the credit cooperatives have not faced crisis so far.

Still due to the lockdown period, some agricultural sectors such as vegetable fresh produce, dairy and poultry were affected, and would require support. This is being facilitated by the Government of India, which –next to a debt moratorium of 6 months- provided a liquidity infusion for agriculture of INR 20,000 Crore, used by banks (including cooperative banks) for additional credit extension to agriculture. 

Relevance of cooperatives will remain, but the functioning will change

The cooperative network in Telangana has shown great resilience during the time of the crisis, also in terms of financial service delivery. Deposits entrusted to the cooperatives by their members have increased, and only about 50% of their agricultural members exercised their right to a debt moratorium. 

Although the agricultural sector was only mildly affected by COVID-19, other sector such as industry, services and hospitality have been affected much more, and will need financial support as well. But also, private- and public sector employees have been affected as they only received 50% of their salary and therefore faced a liquidity shortage. The cooperative network in Telangana has launched 6 new products for emergency support to these sectors. 

Now more than ever, the cooperative sector acknowledges that SME and agricultural credit delivery will increasingly be geared towards the clients’ needs in terms of amount of finance, conditions of finance and delivery mechanisms.  During the COVID-19 situation, the cooperative network has proven its relevance for rural Telangana (and India), but it is also highlighted that the functioning of the cooperatives will change, and that even more customer value can be created going forward.

Dr. Muralidhar Nethi – MD of Telangana State Cooperative Apex Bank, which is the apex institution of the cooperative credit network in Telangana (India), which includes APEX Bank with 42 branches, 9 District Cooperative Central Banks with a total of 389 branches and additionally 799 primary cooperatives.