CHALLENGES BEFORE CO-OPERATIVE BANKS
By:Mr B. Singh Vice Principal,
CHALLENGES BEFORE COOPERATIVES
Identity. Competition from CBs and also UCBs. Technological advancements. Professionalism and core area of competence. Business diversification. Resource mobilization. Government support and control.
PROBLEMS BEING FACED BY COOPERATIVES
FINANCIAL IMPAIRMENT
Mounting NPAs. Accumulated losses. Non compliance with section 11 of BR Act. Erosion of [Link] Dwindling market share. No regular recruitments- ageing staff. Inadequate qualification as compared to their peers. Lack of capacity building of staff.
HUMAN RESOURCES
PROBLEM BEING FACED BY COOPERATIVES
GOVERNANCE IMPAIRMENTS
Non conduct of elections for long time. Delay in audit. Intrusion of the state in to the financial and managerial matters of STCCS. Deputation of govt. officials in managerial position. Common cadre No relation between staffing pattern and business. Interference in operational decision making. Poor housekeeping. Weak MIS.
MANAGERIAL IMPAIRMENTS
REVIVAL PACKAGE: OBJECTIVE
Provide financial assistance to bring the system to an acceptable level of health. Introduce legal and institution reforms necessary for their democratic, self-reliant and efficient functioning; and Take measures to improve the quality of management.
REVIVAL PACKAGE:APPROACH
Financial
assistance-one time measure only. Conditional- legal and institutional reforms. States had an option to participate-MoU. States given 2 years to take a decision.
REVIVAL PACKAGE:LEGAL REFORMS
Reforms in cooperative society Act
Full
voting rights to all users incl. depositors. Ensure periodic election and audit, introduce criteria for eligibility to contest, and limit powers to supersede Boards. Remove administrative interventions of State Govt. in the financial affairs of the cooperatives. Withdraw any other restrictive orders. Prohibit Govt. share capital in CCS.
Prohibit Govt. participation in boards. Define and distinguish roles of Boards and Executive clearly. Permit wider access for borrowing and investment. Delimit geographical restriction and permit wider choice for affiliation to upper tiers. Cede full financial regulatory powers to RBI for cooperative banks.
REVIVAL PACKAGE: LEGAL REFORMS
Major recommendation for RBI & GoI BR Act to be amended to bring coop. banks on par with comm. Banks while protecting their democratic character. Amendments to encompass: Fit and proper criteria for eligibility of individual to contest election to the boards of coop banks+cooption of professional with voting rights if not so elected. Minimum qualifications for CEOs and approval of their names Introduction of CRAR norms in a phased manner.
REVIVAL PACKAGE: LEGAL REFORMS
Prohibiting any cooperative other than a cooperative bank as approved by RBI from using the words bank, banking cooperative or banking society. Prohibiting acceptance of public deposits by any cooperative other than a cooperative bank as approved by RBI. Empower NABARD suitably to further improve effectiveness of its supervision.
VAIDYANATHAN COMMITTEE RECOMMENDATION
MEETING THE ACCUMULATED LOSSES
PACS
DCCBs
Accumulated losses due to all credit business to be fully covered by GoI grant. Losses due to non-credit business like PDS, trading etc. to be fully met by state govt State govt. may avail soft loan form GoI if needed Balance accumulated losses due to credit business (to PACS+ other member societies)to be shared by state govt. and GoI (sharing pattern indicated in the report) Losses due DCCBs to be borne by DCCB itself DCCB may avail soft loan form GoI if needed.
MEETING THE ACCUMULATED LOSSES (Cont.) The central Government will bear 100% of the losses arising out of direct credit business of PACS. 100% losses out of the agricultural credit business of DCCBs and SCBs and a potion of their losses out of non agricultural credit business, 50% of the losses due to PDS and 8input distribution undertaken in pursuance of national policy, The requirement of resources to raise CRAR to 7%, Full cost of technical assistance for human resources development, computerisation and improving accounting system.
IMPLEMENTATION MECHANISM
At national level A national steering Committee reporting to the finance Minister every quarter. With representatives of GoI (MoF- FS), GoI (MoA),NABARD,RBI , two representative of state govts. Which are under review, two eminent co operators
At state level A state level Implementation and Monitoring Committee (SLIC) comprising Secretary Finance (chairman), Secretary (Cooperation), RCS,MD (SCB),ED NABARD , and a CA as members At District level (for PACS & DCCBs) A district level implementation committee (DLIC) comprising representatives of NABARD (chairman), and RCS,DCCB and a CA as member
LIMITATIONS TO GROWTH
Lack
of adequate quantities of risk of long-term finance to pay for
capital
Lack
creation of the necessary infrastructure and pre-operative expense
Lack
of well trained staff in adequate
numbers at all levels
LIMITATIONS TO GROWTH
Globalization Lack
of innovation
Technology
MIS Cash Data
handling capture and subsequent management
CO-OPERATIVE BANKS
SWOT ANALYSIS (1 OF 2)
Strengths
Ownership: Members are the owners
and customers of the banks
Weakness
Lack of professionalism: The
members lack right training and educations that is necessary for customer satisfaction
Business among members: The
bank focuses on the development of their members
Lack of infrastructure: The banks
lack in implementation of latest technology such as ATMs and computers
Trust within the members: Trust is
the key factor for effective functioning of a cooperative bank
Affordable interest rates: The
bank offers Loans at reasonable interest rates to their members
Lack of technical knowledge: The
members generally lack domain certification i.e. financial degrees etc.
Small area of operation: The bank
operates only in a limited area
CO-OPERATIVE BANKS
SWOT ANALYSIS (2 OF 2)
Opportunity
Large untapped area for
Expansion: As in India, the major part of the population lives in villages
Threats
Competition: Increasing focus of
commercial banks towards untapped rural sector
Trust in Cooperatives: Better
understanding among the member and the rural customer
Increasing interest rates:
Increasing inflation and liquidity fluctuation results in rise in interest rate by the RBI
Linkage of Cooperatives: Direct
connection with RBI and other cooperatives
Small network for operation:
Unlike commercial banks, the cooperative banks operates in a limited area
Government Support: The
government offers subsidies to the cooperative banks that is in turn transferred to the customers
Changes in Technology: Unable to
adapt to rapid changes in technological environment
THANK YOU
