PROJECT ON

“CO-OPERATIVE BANKING”

Bachelor of Commerce
Banking & Insurance
Semester V

Submitted
In Partial Fulfillment of the requirements
For the Award of the Degree of Bachelor of
Commerce- Banking & Insurance
By
RACHIT VIJ
ROLL NO 36

MITHIBAI MOTIRAM KUNDNANI COLLEGE

OF COMMERCE AND ECONOMICS
BANDRA (w) Mumbai- 400 050

1
 MITHIBAI MOTIRAM KUNDNANI COLLEGE
OF COMMERCE AND ECONOMICS
BANDRA (w) Mumbai- 400 050

CERTIFICATION

This is to certify that Mr. RACHIT VIJ of

B.Com – Banking & Insurance
Semester V (2007-2008) has
Successfully completed the project on
Co-operative Banking under the
Guidance of Mr.A.C.Vanjani

Project Guide- Principal

Mr.A.C.Vanjani. Mr.A.C.Vanjani

Course Co-ordinator-
Internal Examiner-
External Examiner-

2
 DECLARATION

I RACHIT VIJ
Student of B.Com- Banking & Insurance Semester V
(2007-2008) herby declare that I have completed the
project on
Co-operative Banking

The information submitted is true and original to the best of my knowledge.

SIGNATURE OF STUDENT

(RACHIT VIJ)

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 ACKNOWLEDGEMENT

I would like to acknowledge the following as being an

idealistic channel and fresh dimension in the completion of
this project.
I take opportunity to thank university of Mumbai for giving
me chance to do this project. I would like to thank my
principal for providing the necessary facilities required for
the completion of this project. I take this opportunity to
thank our co ordinator and I would also like to thank my
guide Principal A.C.Vanjani whose valuable support and
guidance helped me in every aspect of this project. I would
like to thank my college library, for having provided
various reference books and magazines related to my
project.
Lastly I would like to thank each and every person who
directly or indirectly helped me in the completion of the
project especially parents who supported me throughout my
project.

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 Contents
Topics page no

INTRODUCTION OF BANK

FUNCTIONING OF A BANK

BANKING OVERVIEW

BANKING LENDING

CO-OPERATIVE BANKS - A PROFILE

CO-OPERATIVE BANKS IN INDIA

CO-OPERATIVE MOVEMENT IN INDIA

BRIEF HISTORY OF URBAN CO-OPERATIVE

BANKS IN INDIA

RECENT DEVELOPMENTS

FEATURES OF CO-OPERATIVE BANK

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CO-OPERATIVE BANKS: AN RBI PERSPECTIVE

STATISTICAL DETAILS

CO-OPERATIVE CREDIT STRUCTURE: COMMITTEE

RECOMENDATIONS

CONCLUSION

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 CO-OPERATIVE BANKS

INTRODUCTION

The Co-operative banks has a history of almost 100 years. The Co-
operative banks are an important constituent of the Indian Financial System,
judging by the role assigned to them, the expectations they are supposed to
fulfil, their number, and the number of offices they operate. The co-
operative movement originated in the West, but the importance that such
banks have assumed in India is rarely paralleled anywhere else in the world.
Their role in rural financing continues to be important even today, and their
business in the urban areas also has increased phenomenally in recent years
mainly due to the sharp increase in the number of primary co-operative
banks.

While the co-operative banks in rural areas mainly finance agricultural

based activities including farming, cattle, milk, hatchery, personal finance
etc. along with some small scale industries and self-employment driven
activities, the co-operative banks in urban areas mainly finance various
categories of people for self-employment, industries, small scale units, home
finance, consumer finance, personal finance, etc.

Some of the co-operative banks are quite forward looking and have
developed sufficient core competencies to challenge state and private sector
banks.

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 According to NAFCUB the total deposits & lendings of Co-operative
Banks is much more than Old Private Sector Banks & also the New Private
Sector Banks. This exponential growth of Co-operative Banks is attributed
mainly to their much better local reach, personal interaction with customers,
their ability to catch the nerve of the local clientele.

Though registered under the Co-operative Societies Act of the Respective

States (where formed originally) the banking related activities of the co-
operative banks are also regulated by the Reserve Bank of India. They are
governed by the Banking Regulations Act 1949 and Banking Laws (Co-
operative Societies) Act, 1965.

Cooperative banks were established in India to facilitate

rural credit, and to cater to the needs of small farmers and
b u s i n e s s m e n . T h e y w er e p o p u l ar w i t h m i d d l e a n d l o w e r
i n c o m e g r o u p s b e c a u s e of t h e h i g h i n t e r e s t r a t e s t h e y of f e r e d
as compared to commercial banks.

H o w e v e r , w i t h t h e p a s s a g e of t i m e , m o s t c o o p e r a t i v e b a n k s
lost their purpose. Excessive state control and politicisation
f u r t h e r l e d t o t h e i r d e t e r i o r a t i o n . B y t h e 1 9 9 0 s , n o n e of t h e
public or private sector banks were willing to deal with
cooperative banks and thus even otherwise healthy
cooperative banks were facing a tough time.

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 I n 2 0 0 1 - 2 0 0 2 , m a n y c o o p er a t i v e b a n k s w e r e r o c k e d b y
s c a m s t h a t e x p o s e d t h e m a l p r a c t i c e s i n t h e s e b a n k s . M a n y of
these banks did not a d h er e to the pr u d e n t i a l norms
prescribed by the Reserve bank of India (RBI). The
Madhavapura Mercantile Cooperative Bank (MMCB) had
invested a huge amount in the equity market which was
almost equal to its deposit base, thus, violating the RBI
n o r m s r e l a t i n g t o e x p o s u r e t o t h e e q u i t y m ar k e t . A n o t h e r
b a n k , t h e Kr u s h i C o o p e r a t i v e U r b a n B a n k ( K C U B ) h a d
issued loans and advances amounting to Rs. 530 million as
a g a i n s t i t s d e p o s i t b a s e of R s . 3 5 0 m i l l i o n . N o t o n l y t h a t ,
m o s t o f i t s l o a n s h a d n o t b e e n s e c u r e d . S i m i l ar l y , t h e
Charminar Cooperative Urban Bank (CCUB) faced liquidity
p r o b l e m s d u e t o i n d i s c r i m i n a t e l e n d i n g t o b i g b o r r o w er s
against worthless land. More recently the Nagpur District
Central Cooperative Bank (NDCCB) was involved in
fraudulent dealings in government securities t hr o u g h
brokers.

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Introduction Of Bank :- People say it is the second oldest profession
in the world and it shows no signs of going out of fashion. As long as
savings form an important driver for growth, banking institutions will
remain an integral part of the economy. Since 1969, when the then prime
minister Indira Gandhi nationalized 14 banks, the going was relatively easy
for the PSU banks till the early nineties. Then came the first whiff of
liberalization and the industry saw the entry of several private players.

From a laid-back attitude, many banks were forced to affect a change of

paradigm by focusing on more customer driven services. Now it is no longer
necessary to visit a bank for opening an account. Market savvy banks have
already hooked on to the latest technology by introducing electronic and
internet banking.

We are here to take you through the latest on offer from the banking
sector in terms of both products and services. Happy banking...

2-in-1 accounts - Give me more

Get over with breaking deposits

Short on cash - Piggy bac(n)k on the ATM

Banking on the wire

Your bank is just a click away - Internet banking

When a bank rolls out the red carpet – private and priority banking

Beware of a fake currency note

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Functioning of a Bank

F u n c t i o n i n g o f a B a n k i s a m o n g t h e m or e c o m p l i c a t e d o f
corporate operations. Since Banking involves dealing
directly with money, governments in most countries regulate
this sector rather stringently. In India, the regulation
t r a d i t i o n a l l y h a s b e e n v er y s t r i c t a n d i n t h e o p i ni o n o f
certain quarters, responsible for the present condition of
b a n k s , w h e r e N P A s a r e o f a v e r y h i g h or d e r . T h e pr o c e s s of
financial reforms, which started in 1991 has cleared the
cobwebs somewhat but a lot remains to be done. The
multiplicity of policy and regulations that a Bank has to
work with, makes its operations even more complicated,
sometimes bordering on illogical. This section, which is also
i n t e n d e d f o r b a n k i n g p r of e s s i o n a l , a t t e m p t s t o g i v e a n
overview of the functions in as simple manner as possible.

B a n k i n g R e g u l a t i o n A c t o f I n d i a , 1 9 4 9 d ef i n e s B a n k i n g a s
"accepting, for the purpose of lending or investment of
d e p o s i t s o f m o n e y f r o m t h e p u b l i c , r e p a y a b l e o n d e m a n d or
o t h e r w i s e a n d w i t h dr a w a b l e b y c h e q u e s , dr a f t , o r d er o r
otherwise."

Deriving from this definition and viewed solely from the

p o i n t o f v i e w o f t h e c u s t o m e r s , B a n k s e s s e n t i a l l y p er f or m
the following functions :

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 1. Accepting Deposits from public/others (Deposits)

2. Lending money to public (Loans)

3. T r a n s f e r r i n g m on e y f r o m o n e p l a c e t o an o t h e r
(Remittances)

4. Acting as trustees

5. Keeping valuables in safe custody

6. Government business

But do these functions constitute banking? The answer must be a no.

There are so many intricacies involved in the activities that a bank performs
today, that the above list must sound very simple to a seasoned banker.
Please click on the activity to see what a Bank has to do to give the above
services to its customers. These activities can also be described as back
office banking.

Banks are organised in a linear structure to performed these activities at

the base of which lies a Branch. The corporate office of a bank is normally
called Head Office.

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Accepting deposits is one of the two major activitie s
of the Banks.

Banks are also called custodians of public money.

Basically, the money is accepted as deposit for safe keeping.
B u t s i n c e t h e B a n k s u s e t h i s m o n e y t o e ar n i n t e r e s t f r o m
p e o p l e w h o n e e d m o n e y , B a n k s s h a r e a p ar t o f t h i s i n t e r e s t
w i t h t h e d e p o s i t o r s . T h e q u a n t u m of i n t e r e s t d e p e n d s u p o n
t h e t e n o r - l e n g t h o f t i m e f or w h i c h t h e d e p o s i t o r w i s h e s t o
keep the money with the Bank - and the ease of withdrawal.
T h e t h u m b r u l e i s , l o n g e r t h e t e n or , h i g h e r t h e r a t e of
i n t e r e s t a n d l e s s e r t h e r e s t r i c t i o n s o n w i t h dr a w a l , l e s s e r t h e
interest. Exceptions, however, exist. Deposits are accepted
from both resident (domestic) or n o n- r e s i d e n t Indian
customers.

I t i s t h e b u s i n e s s o f t h e b a n k er t o a c c e p t d e p o s i t s s o t h a t h e
c a n l e n d i t t o o t h e r s a n d e a r n i n t er e s t . D e p e n d i n g u p o n t h e
l i q u i d i t y p o s i t i o n o f t h e m ar k e t a n d t h e s i z e of d e p o s i t , t h e
e a r n i n g s c a n v a r y a n d i f t h e s i z e of t h e d e p o s i t i s b i g
enough, it is advisable to shop around and get the best rate.

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 T y p e o f d e p o s i t a c c o u n t s ( D o m e s t i c C u s t om e r s )

1. Fixed Deposit Accounts

2. Demand Deposits

♦ Savings Account

♦ Current account

Most of the other products offered by the Banks viz. Recurring Deposit
Account, Multi Option Deposit Account, Special Term Deposit Accounts,
Current Fixed Account etc. are essentially combinations of the above basic
type of accounts and are packaged by different Banks to attract different
groups of customers

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Banking Overview:

The major participants of the Indian financial system are the commercial
banks, the financial institutions (FIs), encompassing term-lending
institutions, investment institutions, specialized financial institutions and the
state-level development banks, Non-Bank Financial Companies (NBFCs)
and other market intermediaries such as the stock brokers and money-
lenders. The commercial banks and certain variants of NBFCs are among the
oldest of the market participants. The FIs, on the other hand, are relatively
new entities in the financial market place.

Co-operative movement is quite well established in India. The first

legislation on co-operation was passed in 1904. In 1914 the Maclagen
committee envisaged a three tier structure for co-operative banking viz.
Primary Agricultural Credit Societies (PACs) at the grass root level, Central
Co-operative Banks at the district level and State Co-operative Banks at
state level or Apex Level. The first urban co-operative bank in India was
formed nearly100yearsbackinBaroda.

Co-operative Institutions are engaged in all kinds of activities namely

production, processing, marketing, distribution, servicing, and banking in
India and have vast and powerful superstructure. Co-operative Banks are
important cogs in this structure.

In the beginning of 20th century, availability of credit in India, more

particularly in rural areas, was almost absent. Agricultural and related

15
activities were starved of organised, institutional credit. The rural folk had to
depend entirely on the money lenders, who lent often at usurious rates of
interest.

The co-operative banks arrived in India in the beginning of 20th Century as

an official effort to create a new type of institution based on the principles of
co-operative organisation and management, suitable for problems peculiar to
Indian conditions. These banks were conceived as substitutes for money
lenders, to provide timely and adequate short-term and long-term
institutional credit at reasonable rates of interest.

In the formative stage Co-operative Banks were Urban Co-operative

Societies run on community basis and their lending activities were restricted
to meeting the credit requirements of their members. The concept of Urban
Co-operative Bank was first spelt out by Mehta Bhansali Committee in 1939
which defined on Urban Co-operative Bank . Provisions of Section 5 (CCV)
of Banking Regulation Act, 1949 (as applicable to Co-operative Societies)
defined an Urban Co-operative Bank as a Primary Co-operative Bank other
than a Primary Co-operative Society were made applicable in 1966.

With gradual growth and also given philip with the economic boom, urban
banking sector received tremendous boost and started diversifying its credit
portfolio. Besides giving traditional lending activity meeting the credit
requirements of their customers they started catering to various sorts of
customers viz. self-employed, small businessmen / industries, house finance,
consumer finance, personal finance etc.

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Banking Lending:

Fund requirements of a corporate are of two types.

Short Term Finance: STF is required to meet daily, seasonal and temporary
working capital needs. These are also called cash cycle needs.

Long Term Finance: LTF is required for medium to long-term purposes to

meet the cost of acquisition of fixed assets for diversification, expansion.
Modernisation as also to meet the permanent working capital requirements.
Institutional debt is available from FIs and Banks. Owing to their nature of
operations, corporates have tapped FIs for long term finance and Banks for
short term funding. However, lately the roles are getting juxtaposed with FIs
making forays into short end of the debt market and Banks also pursuing the
long end of the debt market.

DOMESTIC LENDING

GLOBAL LENDING

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CO-OPERATIVE BANKS - A PROFILE:

I n t h e e a r l y 2 0 t h c e n t u r y , t h e a v a i l a b i l i t y of c r e d i t i n
India, more particularly in rural areas was non existent.
T h e r e w a s n o o r g a n i z e d i n s t i t u t i o n a l c r e d i t f or a g r i c u l t ur a l
a n d r e l a t e d a c t i v i t i e s . P e o p l e i n t h e r ur a l a r e a s l a r g e l y
depended on money lenders who lent money at very high
rates of interest. Thus, there was need to create an
i n s t i t u t i o n w h i c h w o u l d c a t e r t o t h e n e e d s o f or d i n a r y p e o p l e
and was based on the principles of cooperative organisation
and management. In 1904, the first legislation on co-
operatives was passed. In 1914, the Maclagen committee
suggested a three tier structure for cooperative banking i.e
Primary Agricultural Credit Societies at the grass root level,
Central Cooperative Banks at the district level and State
C o o p e r a t i v e B a n k s a t t h e S t a t e or a p e x l e v e l . C o o p e r a t i v e
banks were expected to serve as substitutes for money
lenders, and provide both short-term and l o n g- t e r m
i n s t i t u t i o n a l c r e d i t a t r e a s o n a b l e r a t e s o f i n t er e s t .

The Co-operative banks has a history of almost 100

y e a r s . T h e C o - o p e r a t i v e b a n k s a r e a n i m p or t a n t c o n s t i t u e n t
o f t h e I n d i a n F i n a n c i a l S y s t e m , j u d g i n g b y t h e r ol e a s s i g n e d
to them, the expectations they are supposed to fulfil, their

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n u m b e r , a n d t h e n u m b er of o f f i c e s t h e y o p e r a t e . T h e c o-
operative movement originated in the West, but the
i m p o r t a n c e t h a t s u c h b a n k s h a v e a s s u m e d i n I n di a i s r ar e l y
p a r a l l e l e d a n y w h e r e e l s e i n t h e w o r l d . T h e i r r ol e i n r u r a l
f i n a n c i n g c o n t i n u e s t o b e i m p or t a n t e v e n t o d a y , a n d t h e i r
b u s i n e s s i n t h e u r b a n ar e a s a l s o h a s i n c r e a s e d p h e n o m e n a l l y
in recent years mainly due to the sharp increase in the
n u m b e r o f p r i m a r y c o- o p e r a t i v e b a n k s .

While the co-operative banks in rural areas mainly

finance agricultural based activities including f ar m i n g ,
cattle, milk, hatchery, personal finance etc. along with some
s m a l l s c a l e i n d u s t r i e s a n d s e l f - e m p l o y m e n t dr i v e n a c t i v i t i e s ,
t h e c o - o p e r a t i v e b a n k s i n ur b a n a r e a s m a i n l y f i n a n c e v a r i o u s
c a t e g o r i e s o f p e o p l e f or s e l f - e m p l o y m e n t , i n d u s t r i e s , s m a l l
scale units, home finance, consumer finance, personal
finance, etc.

S o m e o f t h e c o - o p er a t i v e b a n k s a r e q u i t e f or w a r d l o o k i n g
and have developed sufficient core competencies to
c h a l l e n g e s t a t e a n d pr i v a t e s e c t o r b a n k s .

According to NAFCUB the total deposits & lendings of

C o - o p e r a t i v e B a n k s i s m u c h m or e t h a n O l d P r i v a t e S e c t o r
Banks & also the New Private Sector Banks. This
e x p o n e n t i a l g r o w t h o f C o - o p er a t i v e B a n k s i s a t t r i b u t e d
mainly to their much better local reach, personal interaction

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w i t h c u s t o m e r s , t h e i r a b i l i t y t o c a t c h t h e n e r v e of t h e l o c a l
clientele.

T h o u g h r e g i s t e r e d u n d e r t h e C o - o p er a t i v e S o c i e t i e s A c t
o f t h e R e s p e c t i v e S t a t e s ( w h er e f or m e d or i g i n a l l y ) t h e
banking related activities of the co-operative banks are also
regulated by the Reserve Bank of India. They are governed
by the Banking Regulations Act 1949 and Banking Laws
(Co-operative Societies) Act, 1965.

Co Operative Banks In India :

The Co operative banks in India started functioning almost 100 years ago.
The Cooperative bank is an important constituent of the Indian Financial
System, judging by the role assigned to co operative, the expectations the co
operative is supposed to fulfil, their number, and the number of offices the
cooperative bank operate. Though the co operative movement originated in
the West, but the importance of such banks have assumed in India is rarely
paralleled anywhere else in the world. The cooperative banks in India plays
an important role even today in rural financing. The businessess of
cooperative bank in the urban areas also has increased phenomenally in
recent years due to the sharp increase in the number of primary co-operative
banks.

Co operative Banks in India are registered under the Co-operative Societies

20
Act. The cooperative bank is also regulated by the RBI. They are governed
by the Banking Regulations Act 1949 and Banking Laws (Co-operative

Societies) Act, 1965.

Co-operative Movement in India:

Co-operation occupies an important place in the Indian economy

Perhaps no other country in the world is the world is the co-operative

movement as large and as it is India. There is almost no sector left
untouched by the co-operative movement.

The main areas of operation of co-operatives in India are as under

1. Agricultural Credit

2. Agricultural Supplies

3. Agricultural Marketing

4. Agricultural Processing

5. Functional co-operatives in the fields like dairy, poultry, fisheries ,

fruits, vegetables etc.

6. Industrail co-operatives

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7. Public Distribution of essential commodities through consumer co-
operatives

8. Urban credit Co-operatives

9. Housing co-operatives

Co-operative movement in India is the result of a deliberate

policy of the state and is vigorously pursued through formation of an
elaborate governing infrastructure. The successive Five-year plans
looked upon the co-operation movement as the balancing sector
between public sector and the private sector.

And the success is evident . Almost 50 percent of the total sugar

production in India is contributed by sugar co-operative sand over 60
percent of the total fertilizer distribution in the country is handled by
the co-operatives. The consumer co-operatives are slowly becoming
the backbone of the public distribution system and the marketing co-
operatives are handling agricultural produce with an astounding
growth rate.

The national Co-operative Development Corporation (NCDC),

a statutory body was set up in 1963 by the Union ministry of Civil
Supplies and Co-operation , to promote the co-operative movement in
India.

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 Further there is the Indian Farmers Fertilizer Co-operative LTD
(IFFCO), which has been successful in setting up an effective
marketing network in most of the states for selling modern farming
technology instead of fertilizers alone. The operations of IFFCO are
handled through its more than 30,000 member co-operatives.

The National Agricultural Co-operative Marketing Federation

(NAFED) has over 5000 marketing societies. These societies operate
at the local wholesale market level agricultural produce. Thus the
farmers have a market for their produce right at their door-step. A
market which assures them reasonable returns and guaranteed
payments.

All these Federations are acting like the spokesmen of member

co-operatives and are doing liaisioning work between the co-
operatives and the Government.

In India we find that the state of Maharashtra and Gujarat are

well developed. Whereas the states of Andhra Pradesh, Rajasthan and
Karnataka have shown remarkable progress in the co-operative
movement and there is a vast potential for the development of co-
operative in the remaining states.

Co-operatives today are committed to securing an improvement

in the quality of life of a vast majority of Indian people.

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Brief History of Urban Cooperative Banks in India:

The term Urban Co-operative Banks (UCBs), though not formally

defined, refers to primary cooperative banks located in urban and semi-
urban areas. These banks, till 1996, were allowed to lend money only
for non-agricultural purposes. This distinction does not hold today.
These banks were traditionally centred around communities, localities
work place groups. They essentially lent to small borrowers and
businesses. Today, their scope of operations has widened considerably.

The origins of the urban cooperative banking movement in India can be

traced to the close of nineteenth century when, inspired by the success
of the experiments related to the cooperative movement in Britain and
the cooperative credit movement in Germany such societies were set up
in India. Cooperative societies are based on the principles of
cooperation, - mutual help, democratic decision making and open
membership. Cooperatives represented a new and alternative approach
to organisaton as against proprietary firms, partnership firms and joint
stock companies which represent the dominant form of commercial
organisation.

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The Beginnings:

The first known mutual aid society in India was probably the 'Anyonya
Sahakari Mandali' organised in the erstwhile princely State of Baroda in
1889 under the guidance of Vithal Laxman also known as Bhausaheb
Kavthekar. Urban co-operative credit societies, in their formative phase
came to be organised on a community basis to meet the consumption
oriented credit needs of their members. Salary earners' societies
inculcating habits of thrift and self help played a significant role in
popularising the movement, especially amongst the middle class as well
as organized labour. From its origins then to today, the thrust of UCBs,
historically, has been to mobilise savings from the middle and low
income urban groups and purvey credit to their members - many of
which belonged to weaker sections.

The enactment of Cooperative Credit Societies Act, 1904, however,

gave the real impetus to the movement. The first urban cooperative
credit society was registered in Canjeevaram (Kanjivaram) in the
erstwhile Madras province in October, 1904. Amongst the prominent
credit societies were the Pioneer Urban in Bombay (November 11,
1905), the No.1 Military Accounts Mutual Help Co-operative Credit
Society in Poona (January 9, 1906). Cosmos in Poona (January 18,
1906), Gokak Urban (February 15, 1906) and Belgaum Pioneer
(February 23, 1906) in the Belgaum district, the Kanakavli-Math Co-
operative Credit Society and the Varavade Weavers' Urban Credit

25
Society (March 13, 1906) in the South Ratnagiri (now Sindhudurg)
district. The most prominent amongst the early credit societies was the
Bombay Urban Co-operative Credit Society, sponsored by Vithaldas
Thackersey and Lallubhai Samaldas established on January 23, 1906 ..

The Cooperative Credit Societies Act, 1904 was amended in 1912, with
a view to broad basing it to enable organisation of non-credit societies.
The Maclagan Committee of 1915 was appointed to review their
performance and suggest measures for strengthening them. The
committee observed that such institutions were eminently suited to cater
to the needs of the lower and middle income strata of society and would
inculcate the principles of banking amongst the middle classes. The
committee also felt that the urban cooperative credit movement was
more viable than agricultural credit societies. The recommendations of
the Committee went a long way in establishing the urban cooperative
credit movement in its own right.

In the present day context, it is of interest to recall that during the

banking crisis of 1913-14, when no fewer than 57 joint stock banks
collapsed, there was a there was a flight of deposits from joint stock
banks to cooperative urban banks. Maclagan Committee chronicled this
event thus:

"As a matter of fact, the crisis had a contrary effect, and in most
provinces, there was a movement to withdraw deposits from non-
cooperatives and place them in cooperative institutions, the distinction
between two classes of security being well appreciated and a preference
being given to the latter owing partly to the local character and publicity

26
of cooperative institutions but mainly, we think, to the connection of
Government with Cooperative movement".

Recent Developments:
Over the years, primary (urban) cooperative banks have registered a
significant growth in number, size and volume of business handled. As
on 31st March, 2003 there were 2,104 UCBs of which 56 were
scheduled banks. About 79 percent of these are located in five states, -
Andhra Pradesh, Gujarat, Karnataka, Maharashtra and Tamil Nadu.
Recently the problems faced by a few large UCBs have highlighted
some of the difficulties these banks face and policy endeavours are
geared to consolidating and strengthening this sector and improving
governance.

Source: Adapted from a paper by O.P. Sharma, formerly of the History

Cell.

The National Cooperative Union of India (NCUI) is an Apex

Cooperative Organisation in India which represent all the segments of
Indian Cooperative Movement. Its objectives are to promote and
develop the cooperative movement in India, to educate, guide and assist
the people in their efforts, to build up and expand the cooperative sector
and serve as an exponent of cooperative opinion in accordance with
cooperative principles. It was established in 1929 as All India
Cooperative Institutes Association and was recheristened as National
Cooperative Union of India in 1961.

27
Off-site Surveillance System for Primary (Urban) Co-operative
Banks:
Reserve Bank of India has extended the off-site surveillance system
( OSS) to all non-scheduled urban co-operative banks (UCBs) having
deposit size of Rs 100 crore and above. The decision to extend OSS to
all non-scheduled UCBs has been taken following the stabilisation of
this system in scheduled UCBS.

1. A supervisory reporting system was introduced for the scheduled

Primary (Urban) Co-operatives banks with effect from March 31, 2001,
as a first step towards setting up of a system for Off-site Surveillance
(OSS) of all urban co-operative banks (UCBs).

2. The OSS reporting system comprises a set of 8 returns, of which, the

periodicity of one return, viz. Bank Profile Statement (Return No. 8) is
annual and the rest 7 are required to be submitted at quarterly intervals.

3. The OSS Returns would come into effect from quarter ended June 30,
2004. In order to facilitate smooth transition / operationalisation of the
new set of returns, the period of one month for submission of the returns
would be implemented gradually from the quarter ended December
2004 onwards.

28
4. Prudential concerns monitored through these returns include aspects
relating to solvency, liquidity, capital adequacy, asset quality/portfolio
risk profile, connected or related lending and concentration of exposures
of the supervised institutions.

While the main objective of the reporting system is to obtain

information on areas of prudential interest and monitor regulatory
compliance, the OSS returns are also designed to address the
management information needs and strengthen MIS within the reporting
institutions. A collateral objective of the reporting system is to sensitize
managements of banks to concerns of the supervisory authority and
thereby also help in self-regulation.

5. The Off-site Surveillance Returns are required to be approved by the

Board of Directors / Chief Executive Officer of the bank and sent to the
Officer-in-Charge of Urban Banks Department (UBD) of the Regional
Office of RBI, which has supervisory jurisdiction over the bank and to
which the bank submits other regulatory returns.

The OSS returns may be submitted in hard copy along with a floppy
containing the returns. It may be noted that RBI attaches utmost
importance to this reporting system and expects banks to submit the

29
OSS returns to UBD correctly compiled and within the prescribed time.

To this end, banks may designate and authorise one or two senior
official/s who would be responsible for the correct compilation and
timely submission of these returns and who would be fully responsible
for the information furnished therein. Such designated Authorised
Reporting Official/s (ARO/s) would have to liase with the officials in
the Off-site Surveillance (OSS) Division of UBD. The names and
designations of the ARO/s may be indicated to the concerned Regional
Office of UBD while forwarding the OSS returns.

6. While the information provided in the supervisory returns would be

subject to post-facto verification during on-site inspection by RBI and
by external auditors, it would form the basis, in the interregnum, for
supervisory attention and dialogue with bank managements. The
importance of accuracy and timeliness of reporting therefore needs no
emphasis. The banks may be penalised for furnishing wrong
information to RBI.

Features of Cooperative Banks:

Co-operative Banks are organised and managed on the principal of co-

operation, self-help, and mutual help. They function with the rule of
"one member, one vote". function on "no profit, no loss" basis. Co-
operative banks, as a principle, do not pursue the goal of profit
maximisation.

30
Co-operative bank performs all the main banking functions of deposit
mobilisation, supply of credit and provision of remittance facilities.

Co-operative Banks provide limited banking products and are

functionally specialists in agriculture related products. However, co-
operative banks now provide housing loans also.

UCBs provide working capital loans and term loan as well.

The State Co-operative Banks (SCBs), Central Co-operative Banks

(CCBs) and Urban Co-operative Banks (UCBs) can normally extend
housing loans upto Rs 1 lakh to an individual. The scheduled UCBs,
however, can lend upto Rs 3 lakh for housing purposes. The UCBs can
provide advances against shares and debentures also.

Co-operative bank do banking business mainly in the agriculture and

rural sector. However, UCBs, SCBs, and CCBs operate in semi urban,
urban, and metropolitan areas also. The urban and non-agricultural
business of these banks has grown over the years. The co-operative
banks demonstrate a shift from rural to urban, while the commercial
banks, from urban to rural.

Co-operative banks are perhaps the first government sponsored,

government-supported, and government-subsidised financial agency in
India. They get financial and other help from the Reserve Bank of India
NABARD, central government and state governments. They constitute

31
the "most favoured" banking sector with risk of nationalisation. For
commercial banks, the Reserve Bank of India is lender of last resort, but
co-operative banks it is the lender of first resort which provides
financial resources in the form of contribution to the initial capital
(through state government), working capital , refinance.

Co-operative Banks belong to the money market as well as to the

capital market.

Primary agricultural credit societies provide short term and medium

term loans.

Land Development Banks (LDBs) provide long-term loans. SCBs and

CCBs also provide both short term and term loans.

Co-operative banks are financial intermediaries only partially. The

sources of their funds (resources) 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. It
is interesting to note that intra-sectoral flows of funds are much greater
in co-operative banking than in commercial banking. Inter-bank
deposits, borrowings, and credit from a significant part of assets and
liabilities of co-operative banks. This means that intra-sectoral
competition is absent and intra-sectoral integration is high for co-
operative bank.

32
Some co-operative bank are scheduled banks, while others are non-
scheduled banks. For instance, SCBs and some UCBs are scheduled
banks but other co-operative bank are non-scheduled banks. At present,
28 SCBs and 11 UCBs with Demand and Time Liabilities over Rs 50
crore each included in the Second Schedule of the Reserve Bank of
India Act.

Co-operative Banks are subject to CRR and liquidity requirements as

other scheduled and non-scheduled banks are. However, their
requirements are less than commercial banks.

Since 1966 the lending and deposit rate of commercial banks have been
directly regulated by the Reserve Bank of India.

Although the Reserve Bank of India had power to regulate the rate co-
operative bank but this have been exercised only after 1979 in respect of
non-agricultural advances they were free to charge any rates at their
discretion. Although the main aim of the co-operative bank is to provide
cheaper credit to their members and not to maximize profits, they may
access the money market to improve their income so as to remain
viable.

33
Corporate governance in Co-operative Banks:

At the instance of the Confederation of Indian Industries and the

Securities Exchange Board of India, Joint Stock Companies, which are
registered under the Companies Act, have evolved a set of procedures
for corporate governance. In the light of the recent developments in the
world of co-operative banking, particularly in the case of Madhavpura
Mercantile Co-operative Bank Ltd, such guidelines have become
absolutely imperative.

The dictionary meanings of 'governance' include both "the action or

manner of governing" and "a mode of living, behaviour, demeanour".
But what is sought to be done by the CII and the SEBI is bringing about
complete transparency, integrity and accountability of the management.

When the co-operative movement, which is based on the Friendly

Societies Act of England, got recognition in India with the enactment of
the Co-operative Societies Act of 1904, the possibilities of the
movement embracing all types of activities had not been visualised. The
basic objective at that time was giving a boost to self-help and mutual
trust. People hailing from a particular community, class or region came
together and registered co-operative societies. Urban Co-operative
Banks belong to one such breed.

34
Over the years and more particularly during the '60s, open membership
started replacing community membership. March 1, 1966, saw an
extension of the provisions of the Banking Regulation Act to Urban Co-
operative Banks. Ever since these banks have grown rapidly, spreading
their branches not only within a State, but also outside the home States.

The proliferation of Co-operative Banks all over India over the century
has been quite impressive. They have been able to mobilise over
Rs750bn in terms of deposits and over Rs400bn in terms of advances.
Out of the 2,050 Urban Co-operative Banks in existence today, 51 have
attained the 'Scheduled Bank' status— i.e. each of them has demand and
time liabilities exceeding Rs1bn.

So long as Urban Co-operative Banks were confined to and serving a

particular area or community, there was no need for stringent
regulations. In fact, when their deposits were brought on par with those
of Commercial Banks with the extension of the Banking Regulation Act
in 1966 and Deposit Insurance in 1971, people's confidence in them
took a big leap forward. This is crystal clear from a simple fact: the non-
member deposits in Urban Banks far exceed the member deposits.

However, in the wake of the Madhavpura episode, the confidence of

Urban Banks has received a severe jolt. With more and more of them
finding themselves at the receiving end, their image has been sullied
like never before. It is to refurbish this soiled image and to restore
customer confidence in Urban Banks that the concept of corporate
governance is being bandied about.

Much can be said in favour of the concept of corporate governance, on

the lines of the system prevailing in private sector companies. But,

35
before bringing it into effect, a proper debate on its pros and cons is a
must. The RBI could appoint a small committee, containing
representatives from all the concerned sectors, to pave the for this
change-over. And the committee could come up with a time-bound
programme and evolve the necessary guidelines.

If every bank, alongwith its annual report, publishes a report on its

corporate governance, it would go a long way in helping the authorities
to monitor the functioning of Urban Banks effectively. Not only can
they keep a watch on the working of these banks, they could take timely
action wherever necessary. Transparency/accountability is the order of
the day. Since banking is based on trust, shareholders and depositors
would feel relieved if these two factors are made palpably visible.

Cooperative Banks: An RBI Perspective:

RBI has decided not to allow urban co-operative banks (UCBs) with
less than Rs 50 crore net worth to spread their operations outside their
state of jurisdiction.The main risk exposure of UCBs was not credit risk
but interest rate risk. As interest rates paid by these banks, particularly
on deposits, were out of sync with the rest of the banking sector. The
sheer number of weak UCBs, which is well over 200, is a cause for
concern for the RBI.

Rehabilitation of these banks may involve strategies such as the

registrars directing co-operative courts for speedy recovery process and
execution of decrees, unviable branches being either relocated or closed

36
down, exploring avenues for getting additional capital and merger with
a well-managed bank.

RBI is in favour of ending dual control for UCBs. Therefore,

demarcation of banking-related functions and those that warrant only
state governments' action were required.

According to Mr Capoor the issue of dual control could be resolved in

three ways:

The first approach is by bringing the subject of co-operation under the

concurrent list so as to enable the Union government to legislate in
matters pertaining to co-operative banking. But such a move will
involve constitutional amendments.

The second approach would be for the states to enact progressive

legislations thereby making the registrars confine their functions only to
registration and acceptance of bylaws. This will lead to the dual
command over UCBs ending automatically.

The last approach would be to demarcate the regulatory roles of state

governments and RBI in the state acts, as suggested by the Madhava
Rao committee. Mr Capoor favours the third approach.

37
Government is considering incorporating amendments to the Banking
Regulations Act to empower the Reserve Bank of India to change the
management and chief executive officer (CEO) of urban co-operative
banks (UCBs).

Meanwhile, the RBI had mooted a proposal to set up a separate

supervising and regulatory body for UCBs in its recent Credit Policy.

RBI Policies:

The Reserve Bank of India appointed a High Power Committee in May

1999 under the Chairmanship of Shri K. Madhava Rao, Ex-Chief
Secretary, Government of Andhra Pradesh to review the performance of
Urban Cooperative Banks (UCBs) and to suggest necessary measures to
strengthen this sector. With reference to the terms given to the
Committee, the Committee identified five broad objectives:

1.To preserve the cooperative character of UCBs

2.To protect the depositors' interest

3.To reduce the systemic risks to the financial system

4. to put in place strong regulatory norms at the entry level so as to

sustain the operational efficiency of UCBs in a competitive environment

38
and evolve measures to strengthen the existing UCB structure
particularly in the context of ever increasing number of weak banks and

5. to align urban banking sector with the other segments of banking

sector in the context of application of prudential norms in toto and
removing the irritants of dual control regime.

Reserve Bank of India has extended the off-site surveillance system

(OSS) to all non-scheduled urban co-operative banks (UCBs) having
deposit size of Rs 100 crore and above.... Read detailed guidelines

Cooperative Bank's Forum:

This Discussion forum is to facilitate greater interaction among
professionals from cooperative banks in India. It is also to provide an
platform for professionals from other industries like IT, commercial
banks etc to interact with colleagues from Cooperative Banks.

Here your query or opinion on any matter will be forwarded to all the
members of the group and their answer to your query will be forwarded
to all the members of the group including you. The group also gives
facility to store/share photos and files, coordinate events and more.This
will create a strong platform for mutual discussion.

39
 Short Term Co operative Credit Structure:

NATIONAL FEDERATION OF STATE COOPERATIVE

B A N K S ( N AF S C O B )

S T AT E COOPERATIVE
BANKS (30)

D I S T R I C T C E NT R A L C O O P E R A T I V E
BANKS (368)

PRIMARY FARMERS LARGE SIZED

AGRICULTURAL SERVICE ADIVASI
CREDIT SOCIETIES MULTIPURPOSE
SOCIETIES SOCIETIES

40
STATISTICAL DETAILS:

41
 PRIMARY DISTRICT STATE
SOCIETIES CENTRAL COOPERATIVE
(PACS, FSS & COOPERATIVE BANKS
LAMPS) BANKS ( 3 1 - 0 3 - 2 0 0 5)
(31-03-2005) ( 3 1- 0 3 - 2 0 0 5 ) 1.NO.OF SCBs 30
1.NO.OF STY. 1.NO.OF DCCBs 2.NO.OF BRANCHES
108779 368 INCLUDING H. O.
2.NO.OF 2.NO.OF 953
BRANCHES BRANCHES 3.MEMBERSHIP
INCLUDING H. O. INCLUDING H. O. 157
NIL 12858 4.OWNED FUNDS
3.MEMBERSHIP 3.MEMBERSHIP 758209
127406 2146 5 . DE P O S I T S
4.OWNED FUNDS 4.OWNED FUNDS 4406765
919705 1678833 6.BORROWINGS
5.DEPOSITS 5.DEPOSITS 1467097
1897604 8049350 7 .L O A N S ADV.
6.BORROWINGS 6.BORROWINGS 4432506
4024949 2155710 8 .L O A N S OUTS.
7.LOANS ADV. 7.LOANS ADV. 3530652
3921172 6533578 9.PERCENTAGE OF
8.LOANS OUTS 8.LOANS OUTS. O VE R D U E S TO
4878546 7208961 DE M A N D 1 5 . 2 7
9 . P E R C E N T A GE 9 . P E R C E N T A GE O F
OF OVERDUES T O1 0 . N O . O F
OVERDUES TO DEMAND 32.86 EMPLOYEES 15288
DEMAND 33.59 10.NO.OF
10.NO.OF E M P L O YE E S 1 0 9 1 2 4
E M P L O YE E S 3 8 8 1 1 8
11.NO.OF
42
BORROWERS 45070
Co-operative Bank Scams in India:

"The objective of co-operative banking is to create enduring and

sustainable financial institutions which remain responsive to the credit
needs of weaker sections."

Categories
There are two main categories of the co-operative banks.

(a) short term lending oriented co-operative Banks –

within this category there are three sub categories of banks viz state
co-operative banks, District co-operative banks and Primary

43
Agricultural co-operative societies.

(b) long term lending oriented co-operative Banks –

Within the second category there are land development banks at

three levelsstatelevel, district level and village level.

The co-operative banking structure in India is divided into following

main 5 categories:

1.PrimaryUrbanCo-opBanks

2.PrimaryAgriculturalCreditSocieties

3.DistrictCentralCo-opBanks

4,StateCo-operativeBanks

5. Land Development Banks

Issues & articles related to cooperative Banking:

1.Co-operativecreditstructure:Recommendations

2.Co-operativeBanks:AnRBIPerspective

44
3.Off-site Surveillance System for Primary (Urban) Co-operative
Banks

Co-operative credit structure: Committee

recommendations

The committee on revitalisation support to the co-operative credit

structure, headed by minister of state for finance Balasaheb Vikhe Patil
has recommended that financial support for each such credit institution
be split between the Centre and the respective State Governments in the
proportion of 60:40. However, for the North-Eastern States and Jammu
and Kashmir, it has suggested that the Centre's proportion be raised to
90%.

45
Committeee has recommended that the revitalisation assistance could be
in the form of bonds issued by the Centre and State Governments. These
bonds should be self-extinguishing in nature, and after 10 years, the
bonds will be extinguished without any redemption of the principal
amount.

The committee has also said that a panel be constituted comprising of

the Secretary (Finance), Secretary (Agriculture), Deputy Governor,
RBI, and Chairman, Nabard and representatives of State Governments
for policy direction, review, and monitoring of the cooperative credit
institutions. Similar committees may be constituted at the State-level, it
added. The panel has said that the decision on de-layering of the credit
system should be left to the individual State.

For computation of assistance to the co-operative banks the committee

has suggested that accumulated losses and interest overdue for over
three years should be the basis of calculation.

The committee has also said that scheduling of district co-operative

banks will allow them to borrow funds from Reserve Bank of India and
National Bank for Agriculture and Rural Development (Nabard) which
will reduce their dependence on state co-operative banks.

Committee hopes that recapitalisation would help the co-operative

banks transform themselves into scheduled commercial banks.

46
Why the Co-operative Bank was formed in U.K.?

T h e C o - o p e r a t i v e B a n k c a n t r a c e i t s or i g i n s b a c k t o
1872 and the f or m a t i o n of the Loan and Deposit
Department of the Co-operative Wholesale Society. Four
years later it changed its name to the CWS Bank and
although in the early years it only took deposits and
granted loans to the thousands of local retail c o-
o p e r a t i v e s o c i e t i e s , i t w a s n ot l o n g b e f o r e i t w a s a c t i n g
as a bank for personal customers.

The Bank grew steadily with branches opening in

N e w c a s t l e , L o n d o n a n d G l a s g o w . A f t e r t h e F i r s t W or l d

47
War, the first in-store banking points were established in
Co-op stores and more branches were opened in key
locations.

By 1972 the Bank, which was then known as the Co-

operative Bank, had 32 branches throughout the country.
In 1975 the Co-operative Bank became the first bank for
some 40 years to join the Committee of London Clearing
B a n k s a n d f r o m t h e n o n i t h a s gr o w n a t a r a p i d r a t e .

T o d a y , t h e C o - o p er a t i v e B a n k i s t h e o nl y U K C l e a r i n g
Bank to publish an ethical stance whereby it clearly tells
its customers who it will and will not do business with.
Since launching its ethical positioning in May 1992,
thousands of concerned people who do not wish their
money to be used for unethical reasons have had the
opportunity to choose a like-minded bank.

The Co-operative Bank was one of the first banks to

offer its customers a 24 hour a day telephone banking
service, and is now one of the biggest telephone banking
operators in the UK. It has call centres at Skelmersdale
a n d S t o c k p o r t f o r p e r s o n a l c u s t o m e r s , a n d a t S a l f or d f or
its Business Direct telephone banking service (especially
developed for small and medium sized companies).

T h e B a n k h a s o v er 1 0 0 o u t l e t s c o v e r i n g m o s t m a j or
towns and cities in the country and is a member of the

48
LINK consortium (which means customers can use over
3 0 , 0 0 0 A T M s t h r o u g h o u t t h e U K f r e e of c h a r g e) . I n M a y
1994 the Bank launched the first fully automated
B a n k p o i n t K i o s k . T h i s i s a n u n- s t a f f e d o u t l e t , a v a i l a b l e
24 hours a day, 365 days a year. Customers can use the
LINK cash machine, an automatic deposit machine, and a
video telephone link with the Bank's Armchair Banking
Service.

Over the years the Bank has gained a reputation for

i n t r o d u c i n g i n n o v a t i o n s l a t er a d o p t e d b y t h e r e s t o f t h e
industry. Since 1974 the Co-operative Bank has
consistently offered free banking for personal customers
who remain in credit. It was also the first Clearing Bank
to offer an interest bearing cheque account called Cheque
& Save.

I n 1 9 9 1 t h e B a n k s h o o k t h e cr e d i t c a r d m a r k e t w h e n i t
introduced a guaranteed "free for life" Gold Visa card.

In 1996, the Bank introduced the lowest ever interest

rate credit card - the Advantage card, especially designed
f o r p e o p l e w h o c o n s t a n t l y b or r o w a n d s o f i n d a l o w
i n t e r e s t r a t e m o r e a d v a n t a g e o u s t h a n a n i n t er e s t f r e e
period.

In 1997, the Bank celebrated its 125th anniversary by

launching its Partnership approach, becoming the first

49
company in the UK to produce a "warts and all" social
report. All seven partners involved in the Bank's
activities were included in the report.

The Bank's r e p ut a t i o n f or innovation was again

demonstrated in October 1999 when they launched smile,
the first full Internet bank in the UK. smile has been a
b r e a t h o f f r e s h a i r i n t h e b a n k i n g m ar k e t , w i t h i t s c o s t s
reflecting the reduced costs of I n t er n e t banking -
o f f e r i n g i t s c u s t o m e r s h i g h er i n t e r e s t r a t e s f o r s a v i n g s
a n d l o w e r i n t e r e s t r a t e s f or b o r r o w i n g .

T h e B a n k m a d e a r e t u r n t o t h e m or t g a g e m a r k e t i n 2 0 0 0
when it launched a green flexible mortgage.

Last year the Bank launched the U.K's first ever fixed
r a t e c r e d i t c a r d , w h i c h o f f er e d a g u ar a n t e e d r a t e of
interest until 2006.

I n 2 0 0 2 T h e C o - o p er a t i v e G r o u p b o a r d a n n o u n c e d t h e
formation of Co-operative Financial Services Ltd (CFS).
The move follows the decision to bring The Co-operative
B a n k a n d C o - o p er a t i v e I n s u r a n c e S o c i e t y ( C I S ) c l o s e r
together under "common strategic leadership."

In addition to over three million customer accounts, the Co-operative

is a banker to local authorities, businesses and the retail co-operative
movement

50
Cooperative banks in India finance rural areas
under:
• Farming
• Cattle
• Milk

• Hatchery

• Personal finance

51
Cooperative banks in India finance urban areas
under:
• Self-employment
• Industries

• Small scale units

• Home finance
• Consumer finance

• Personal finance

Some facts about Cooperative banks in India :

• Some cooperative banks in India are more forward than many

of the state and private sector banks.

• According to NAFCUB the total deposits & lendings of

Cooperative Banks in India is much more than Old Private Sector

Banks & also the New Private Sector Banks.
• This exponential growth of Co operative Banks in India is

attributed mainly to their much better local reach, personal

interaction with customers, their ability to catch the nerve of the
local clientele.
Contai Co-operative Bank Limited is amongst the top 100 leading banks
in the urban co-operative banking segment in India. The bank has a
working capital base of Rs 480 crore with profits of Rs 12 crore. The
13-branch bank has 223 employees.

Contai Co-operative Bank's goal was to accelerate growth by increasing

the range and efficiency of its services, expand its customer base, attract
larger deposits and minimize cost of operations.

52
With the implementation of Nelito Systems BIBAS, Contai Co-
operative Bank has been able to provide multi-lingual solutions for the
convenience of its customers, improved and efficient customer services
and has also increased staff productivity.

Bank Account:

A Bank Account is the record of financial relationship a customer has

with the Bank. It contains details of all the moneys deposited with the
Bank and withdrawn from it. There are many Bank accounts, but
basically there are two types:

DEPOSITS LOANS :

B a n k L e n d i n g s F u n d r e q u i r e m e n t s o f a c o r p or a t e a r e o f
two types.

Short Term Finance:

STF is required to meet daily, seasonal and temporary

working capital needs. These are also called cash cycle
needs

Long Term Finance :

53
 L T F i s r e q u i r e d f o r m e d i u m t o l o n g - t e r m p ur p o s e s t o
meet the cost of acquisition of fixed assets for
diversification, expansion. Modernisation as also to meet
the permanent w or k i n g capital requirements.
Institutional debt is available from FIs and Banks. Owing
t o t h e i r n a t u r e o f o p er a t i o n s , c o r p o r a t e s h a v e t a p p e d F I s
for long term finance and Banks for short term funding.
However, lately the roles are getting juxtaposed with FIs
m a k i n g f o r a y s i nt o s h o r t e n d o f t h e d e b t m a r k e t a n d
B a n k s a l s o p u r s u i n g t h e l o n g e n d of t h e d e b t m a r k e t .

1.DOMESTIC LENDING

2.GLOBAL LENDING

Conclusion:

Every authority concerned with Co-operative sector will have to play its part
in ensuring that the aspirations of the Urban Co-operative Banking sector are
nurtured in a manner that depositor interest and the public interest at large is
protected. The role of RBI could, thus, be to frame a regulatory and
supervisory regime that is multi-layered to capture the heterogeneity of the
sector and implement policies that would provide adequate elbowroom for
the sector to grow in a non-disruptive manner. The State and Central
Governments could recognize that the UCBs are not just co-operative
societies but they are essentially banking entities whose management

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structure is that of a co-operative. They should recognize the systemic
impact that inefficient functioning of the entities in the sector could have.
Consequently, it would be in the interest of the sector if they support,
facilitate and empower the RBI to put in place mechanisms and systems that
would enable these UCBs to perform their banking functions in a manner
that is in the overall interest of the depositor and the public at large.

ABBREVIATION

♦ Reserve bank of India (RBI)

♦ Madhavapura Mercantile Cooperative Bank
(MMCB)
♦  K r u s h i C o o p e r a t i v e Ur b a n B a n k ( K C U B )
♦ Charminar Cooperative Urban Bank (CCUB)
♦ Nagpur District Central Cooperative Bank
(NDCCB)
♦ Limited liability companies (LLCs)
♦  Primary Agricultural Credit Societies (PACs)

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 ♦  U r b a n C o o p er a t i v e B a n k s ( UCBs)
♦  Cash Reserve Ratio (CRR)
♦  Statutory Liquidity Ratio (SLR)
♦  National Cooperative Union of India (NCUI)
♦  Off-site Surveillance (OSS)
♦  Urban Banks Department (UBD)
♦  Authorised Reporting Officials (ARO/s)
♦  State Co-operative Banks (SCBs)
♦  Central Co-operative Banks (CCBs)
♦  Urban Co-operative Banks (UCBs)
♦  Land Development Banks (LDBs)
♦  chief executive officer (CEO)
♦  Nagpur District Central Cooperative Bank (NDCCB)
♦  Charminar Cooperative Urban Bank (CCUB )
♦  N a t i o n a l B a n k f or A g r i c u l t ur e a n d R u r a l
Development(NABARD)
♦ Banking Regulations Act (BR)

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