TOPIC: COOPERATIVE BANKS INTRODUCTION OF COOPERATIVE BANK

WHAT IS COOPERATIVE BANK

DEFINATION OF COOPERATIVE BANK

FEATURES OF COOPRAIVE BANK

TYPES OF COOPERATIVE BANK

FACT OF COOPERATIVE BANK

CURRENT SCENARIO

INTRODUCTION: COOPERATIVE BANKS

Cooperative banks started in INDIA in1904. The first urban cooperative credit society was

registered in CANJEEVARAM (KANJIVARAM) in the erstwhile Madras province in October, 1904.

They are the primary financiers of agricultural activities, some small-scale industries and self-employed workers.

The ANYONYA CO-OPERATIVE BANK in India is considered to have been the first cooperative bank in ASIA.

They perform all the activities as all banks perform.

WHAT IS COOPERATIVE BANK

COOPERATIVE BANK: Co-operative banks are small-sized units organized in the co-operative sector which operate both in urban and non-urban centers

In India, co-operative banks finance small borrowers in industrial and trade sectors, besides professional and salary classes.

DEFINATION OF COOPERATIVE BANK

DEFINATION : It is a business organization owned and managed by a group of individual for their mutual benefit

TYPES OF COOPERATIVE BANKS

Function of cooperative bankDuality control: cooperative banks were

control by both the regulatory RBI as well as GOVERNMENT.

FUNCTION CONTROLLED BY RBI: Banking related functions (viz. licensing, area of operations, interest rates etc.) were to be governed by RBI.

FUNCTION CONTROLLED BY GOVERNMENT: registration, management, audit and liquidation, etc. governed by State Governments.

PROMOTE BACKWARD AREA: the main function of cooperative banks is to open the branches in backward area support from RBI and Government.

Financing rural sector : Farming Cattle Milk Personal finance

Financing rural sector : Self-employment ,Small scale units Home finance, Consumer finance etc

Features of cooperative banks PURPOSE: First important feature of cooperative banks

is not maximize profit but to provide the best product and services to its member

VOTING RIGHTS: Members of cooperative banks democratically elect board of directors. Members usually have equal voting rights according to the co-operative principle of “one person, one vote

PROFIT SHARING: cooperative banks divided their profit either through dividend or through an interest which is related to number of shares held by the members AREA OF OPERATION: as there is limited capital the cooperative banks operates under local areasREGISTRATION : It is registered under the cooperative societies act 1965

SOURCES OF FUND :Their main sources of fund are(a) central and state government,(b) the Reserve Bank of India and NABARD, (c) other co-operative institutions, (d) ownership funds and, (e) deposits or debenture issues

CONTINUOUS EXISTENCE: cooperative society can enjoy long life even if death of member or retire of member.

Type of cooperative banks

URBAN COOPERATIVE BANKS

STATE LAND DEVELOPMENT

STATE COOPERATIVEBANK

NABARD

RBI

STATE COOPERATIVE

BANK

CENTRAL COOPERAIVE

BANK

PRIMARY AGRI CREDIT SOCIETY

STATE LAND DEVELOPMEN

T

CENTRAL LAND

DEVELOPMENT

PRIMARY LAND

DEVELOPMENT

URBAN COOPERATIVE BANKS

STATE COOPERATIVE BANKS TIER : state cooperative banks is the first

tier of cooperation credit structure BRANCHES : there are 28 state cooperative

banks with branches in the country .they are the apex banks in cooperation credit structure .

AIM: these state cooperative bank are advance loan to central cooperative banks

REGULATION: they also coordinate & regulate the working of CCB’s

LINK: they form a link between RBI, NABARD, OTHER LOWER LEVEL COOPERATIVE BANKS.

SOURCE OF FUND: They get 50-90% of advances from NABARD, DEPOSIT FROM PUBLIC, GENERAL RESERVES

LENDING AMOUNT: SCB’s annually lends Rs7700 to CCB’s & PACS

Central cooperative banks TIER : district central cooperative banks is

the second tier of cooperation credit structure

AIM: district central cooperative bank are advance loan to primary agriculture credit society (PACS) cooperative banks so they can fulfilled need or requirement of farmer

BRANCHES : there are 364 district central cooperative banks with branches in the country .

MANAGE BY: district central cooperative banks by some private individual as shareholder as well as management. Most of these banks are under controlled by political leaders

LINK: they form a link between state cooperative banks & primary agriculture credit society

SOURCE OF FUND: They get advances from state government , NABARD, RBI.

PRIMARY AGRICULTURE CREDIT SOCIETY (PACS)

TIER : primary agriculture credit society is the third tier of cooperation credit structure.

COMMENCE: primary agriculture credit society started by ten or more member in village.

MANAGEMENT : the management was under elected body of a PRESIDENT, TREASURER & SECRETARY.

PERIOD OF LOAN: primary agriculture credit society provide short term loan to farmer for 1year for Agriculture purpose

RATE OF INTEREST: primary agriculture credit society provide on 10 to 12per annum of rate of interest.

LENDING AMOUNT: in 1950-51 they advance loans worth Rs 23 crore which rose to 200 crore in 1960-61 and 14000 crore in 1997-98 & entered into weaker section of credit society

Shortcomings of Dual Control

Contd…..Banking related functions (viz.

licensing, area of operations, interest rates etc.) were to be governed by RBI under Banking Act.

Registration, management, audit and liquidation, etc. governed by State Governments as per the provisions of respective State Acts, in 1968.

Contd…Y V Reddy (Reserve Bank

Governor)• "It has been difficult to ensure

effective coordination owing to the problems of dual control (over UCBs) in the matters of governance, which have a bearing on prudential regulation,"

Problems:• Misutilisation of resources by the

management: The problem the regulator faces in monitoring

these banks arises due to the sheer number of banks. This makes it extremely difficult if not impossible for the regulator to gather data to detect and suggest prompt corrective measures.

• Prompt regulatory action:There are several areas where the jurisdictions of

RBI and state governments overlap. This leads to delays in implementation of corrective policies in banks that are suspected to engage in mismanagement.

Contd…• Political interference

The involvement of politicians in their functioning. It is commonly argued that politicians use cooperative banks to allocate favours to extract political rents. This makes banks weak as they are used to allocate loans in exchange for political favours. The interference of politicians also creates hurdles for regulators in implementing corrective measures in mismanaged banks.

• Lack of professional management As the Banks have dual control lot of their time,

resources, funds, and man power is utilized in managing these two regulators. So a professional approched is lacking

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