Riyaz Ahmed Bhat
The concept of cooperation owes its origin to the history of mankind which is an instinct to work in a group helping each other in the times of difficulties. This principle has given rise to the groups of individuals working for a common goal, laying down principles voluntarily agreeing to pool their resources for mutual benefit. Such a group managed by the members themselves is modern day cooperative society.
Historically cooperative movement is believed to have started with the formation of Fenvick weavers’ consumer cooperative in 1769 in Iyreshore Scotland. The movement then travelled around world gaining momentum thus becoming visible in social, cultural and economic sectors. In India, Cooperative movement is almost century old because it was in 1904 when first law, regulating the working of cooperative societies, was promulgated by British India Government. The first society registered, under this law, was in Kanjipoorum now in Tamil Nadu. Afterwards the registration of cooperative societies helped in institutionalizing of lending through banking institutions formed on the basis of principle of cooperation hence giving to birth one of the largest banking structures in India having base as primary credit societies, in middle the District Cooperative Banks and Apex as Central Cooperative Banks. This banking structure is vast network spread in all geographical areas of India carrying the banking operations for a vast population segmented in communities or geographical areas. These cooperative Banks can be categorized under three headings.
* Urban cooperative Banks (UCBs)
* Rural cooperative Banks(RCBs)
* Multi state cooperative Banks (MSCBs)
These Banks have a dual regulatory control of State Government through registrar of cooperatives (ROC) and Reserve Bank of India(RBI). The ROC regulates the ownership/Management affairs while as the RBI supervises the regulation with regard to banking operations.
Right from 1947 the Govt. of India (GOI) has been guided by recommendations of various expert committees to bring in reforms in Cooperative banking sector owing to high rate of failures in this segment. The first of such committee formed was Saraiya Committee (1948) and main discussion of these committees was that how the full potential of these institutions could be best exploited for development of rural and urban independent India. Following recommendations the working of these banks the Government acting through regulator often tightened noose by laying stringent norms on various occasions. In the recent report published by RBI a continuing concern has been expressed on working of cooperative institutions. The report speaks them of being often plagued by financial health conditions. It also reports that following consolidation by UCBs the size of their balance sheets has increased while their number has reduced to 1574 as on 2015-16 from 1579 as on 2016-17. Further reports confirm that the profitability had come under serious stress because of detiorating asset quality in line with other players in the segment. However to improve upon the working RBI launched recently some steps which included issuing of license to unlicensed banks and a financial assistance programme in 2016 to help the UCBs intending to shift over to centralized banking solutions. Again the reports by RBI declare that number of rural cooperative institutions has come down from 94718 in 2013-14 to 93913 in 2015-16 which includes State Central Cooperative Banks (SCCBs), District Central Cooperative Banks (DCCBs) and primary agricultural cooperative societies (PACs). These institutions observed a slow down in their growth however experiencing a sharp increase in their operating expenditure.
Though an improvement in NPA %age from 2013-14 is being observed across spectrum of DCCBs and SCCBs alongwith PACs yet it is felt a lot of improvement is needed to better the prevailing conditions in this important segment. Also the continuing declining market share of cooperative institutions in banking is a depiction of the trend that the credit disbursal has been growing in large ticket size loans from commercial banks rather than to small borrowers from cooperative sector which almost caters to 70 percent of population. This trend is continuously reported by RBI in both the declining market share of UCBs and RCCBs/DCCBs alike.
Foregoing discussion has clearly brought in open the picture of cooperative banking with regard to its operational mechanism, advantages and problems faced every time. It is evident that this banking structure still is like lifeline to a vast urban and rural population in terms of providence of banking facilities yet we are aware that GOI on various occasions tried to resurrect an alternative banking structure to match it so that in case of any failure the crisis bound to erupt could be averted. These attempts were followed repeatedly first after nationalization of banks, in 1969, when commercial banks were asked to move to unbanked areas for branch expansion and then with incorporation of Regional Rural Banks after enactment of RRB act in 1976.
Again understanding the problems faced by cooperative banking one needs to segregate these banks into urban and rural category because both need to be understood and handled separately. The urban scenario is that most of UCBs are community controlled having poor management and lack of supervisory controls. Most of the cure of the problems of these banks lies in tightening supervisory controls with a strict action against persons who are responsible for failures like failure of Madhavpur Central Cooperative Bank of Gujrat. Secondly the rural phenomenon is that these banks need multipronged strategy like recapitalization and augmentation of human capital by upgradation of skills alongwith close monitoring to enforce supervisory control regulations. In both the scenarios the professional management of UCBs and RACBs alongwith PACCs needs to be upgraded and the Governments at state and central level have to earmark funding for the purpose. The budget 2018-19 of J&K has laid down the way which needs to be followed by other State Governments to revitalize the cooperative banking in rural areas. Now the stake holders of Cooperative sector in J&K need to capitalize on this opportunity so as the cooperative banking continues to play its role in providing the credit delivery to its share holders in rural areas of state by pooling its resources from its membership.
Concluding cooperative movement is as old as human race and it is going to remain there in every sector of human interface including banking with its downs and resurgence with varying vigour and vitality.
(The author is Secretary General Jammu and Kashmir Bank Officers Forum)
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