mfi- cooperative bank

8/8/2019 MFI- Cooperative Bank

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IDBI

Presented by:Hardeep Kaur (5809)

Gurpreet Kaur (5817)


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Introduction

The existence of the co-operative banks goes back to the early 20th

century when the availability of credit was non-existent in Indiaespecially in the rural areas. People in the rural areas at that timewere dependent on the money lenders who lent them at very highrates, due to the lack of any organized institutional credit for the

agricultural and related activities. This led to the creation of theinstitutions which would cater to the needs of the ordinary peopleand was based on the principles of cooperative organization andmanagement. The first legislation on co-operatives was passed in1904 and a three tier structure for the cooperative banking wassuggested by the Maclagen Committee in 1914. The three tiers

included primary agricultural credit societies at the grass root level,central co-operative banks at the district level and state cooperativebanks at the state level. These co-operative banks were expected toserve as substitutes for money lenders and provide both the longterm as well as short term credit at reasonable rates of interest.


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Features Of Cooperative Bank

The cooperative banks are managed and organized on the

principle of co-operation, self help and mutual help. They

function on no profit, no loss basis with the rule of one

member, one vote. As per their principle the co-operative

banks cannot pursue the goal of profit maximization.

The Co-operative banks perform all the main banking

functions of deposit mobilization ,supply of credit and

provision of remittance facilities. Although the Co-operative

banks provide limited banking products and are functionallyspecialist in agriculture related products, but they now

provide housing loans also.


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Categories Of Co-operative Banks

There are two categories of the co-operative banks:

Short term lending oriented co-operative banks

this category includes three sub-categories viz.

State co-operative Banks, District Co-operativeBanks, Primary Agricultural Credit Societies.

Long term lending oriented co-operative banks

it includes the land development banks at three

levels such as state level, district level and village

level.


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Cooperative credit institutions in India

Urban cooperative

banks (1721)

Scheduled

UCBs (563)

Non-Scheduled

UCBs (1668)

Rural cooperative credit institution

(96061)

Short Term

(95344)

State cooperative banks

(31)

District centralcooperative banks

(371)

PrimaryAgricultural

credit Societies

(94942)

Long Term

(717)

SCARDB (20)

PCARDES

(697)


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Primary Agriculture Cooperative

societiesThe main objectives of a PACS are:

To raise capital for the purpose of giving loans

and supporting the essential activities of themembers.

To collect deposits from members with the

objective of improving their savings habit.

To supply agricultural inputs and services to

members at remunerative prices.


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District Central Co-operative Banks

Functions of DCCB

Serve as balancing centre in the district central

financing agencies. Organize credit to primaries.

Carry out banking business.


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State Co-operative Banks

Serve as balancing centre in the States

Organize provision of credit for credit worthy

farmers Carry out banking business

Leader of the Co-operatives in the States


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Rural Co-operative Banks

Established to facilitate rural credit & cater tothe needs of small farmers& businessmen

Were popular with the middle & low incomegroups due to high interest rates offered

cooperative bank scams in 2001-02, led toexposure of malpractices of the banks as many

didnt adhere to the prudential normsprescribed by RBI

Government launched several schemes


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Scheme 1:

Share Capital Contribution to Credit Institutions underLTO Fund (State Level Scheme) The Government

sanctions share capital contribution to District CentralCo-operative Banks. This contribution is given out ofthe LTO Fund of the NABARD. The provision is madeevery year to repay this loan.

Scheme 2:

Loans to Co-operative Credit Institutions for conversionof short term loans into medium term loans.



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Scheme 3:

National Agricultural Credit Stabilization Fund (Centrally SponsoredScheme) In drought conditions the members of Agricultural CreditSocieties may not be able to repay the crop loans. This schemehelps to convert their short-term loans into medium term loans and

fresh crop loans are made available to the members.

Scheme 4:

Crop Production Incentive to Agriculturists (Dr.Punjabrao DeshmukhCrop Production Incentive Scheme) this scheme is applicable for

Kharif and Rabbi Crops taken from 1.4.90 onwards. The farmersborrowing loans of RS.25, 000 or less and who repay their loansfully before the due date are eligible for 4 % of the principal amountas an incentive.



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Scheme 5:

In the industrial co-operative societies of weaker sections of the societies, the

Government has several schemes

Financial Assistance for Tools and Equipment's.

Interest Subsidy for Working capital: The government gives an interest subsidy up to 3.5% to 4.5% on the amount

borrowed by the co-operative

This scheme helps to reduce the burden of interest on the co-operative society

which is to be paid to financial agencies.

Scheme 6:

Central Sector Scheme for Development of Women Co-operatives: Under this

scheme financial assistance would be provided by the Central Government on 100

% basis to the newly formed co-operative societies by the women as well as

existing womens co-operatives.



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Scheme 7:

Co-operative Godowns: The Warehousing Corporation

provides 90% assistance for the construction of go down out

of which 50% is loan and 40% is Government share capital.



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RBIs Policies In Relation To

Cooperative Credit

In 1951, the RBI appointed an All-India Ruralcredit survey committee to conduct acomprehensive rural credit survey.

It was found that only 3.1 per cent (of Rs.750crores worth of borrowings of the cultivators)was owed to co- operative societies

It was found that co-operative credit fell short of

the right quantity which was not of the right type,did not serve the right purpose and often Failedto go to the right people


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Three main items were included:

The development of co-operative credit,

Expansion of co-operative economic activityand

Training of co-operative personnel.

RBIs Policies In Relation To

Cooperative Credit


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Provision of Finance

Agriculture finance:

indirectly through co-operative sector

credit extended is of three types i.e. short term,medium term and long term

established in 1956 two national funds

The National Agriculture Credit Fund (long term

operations)

The National Agriculture Credit (Stabilization)

fund


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Non Agricultural finance:

The RBI also provides short- term finance for

The production marketing activity of cottageand small-scale industries

The purchase and distribution of fertilizers,

these loans are generally provided through

state co-operative bank against guarantees ofthe state governments.

Provision of Finance


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Weakness Of Co-operatives In Rural

Credit

low income and low credit worthiness

lack of sense of business management and

administration Lack of organizational skills

Lack of coordination between the central co-

operative banks and primary agriculturalsocieties

Unsatisfactory coverage of credit societies


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Difficulties FacedBy Co-operative

B

anksI

nR

ural Areas Slow progress

Limited scope of investment

Delay in decision making

Lack of training facilities

Poor recovery rate

Lack of local participation Poor development of rural areas


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EmergingIssues And Challenges

CHALLENGES

self-help groups sponsored by NGOs and financial institutionscoming up as on alternative and innovative credit deliverysystem

Other challenges include: Market Competition.

Removal of Regional Imbalances in Co-op. growth.

Innovative measures for mobilization of resources.

Organizational restructuring aimed @ improving the

strength of the movement to with stand competition frommultinational corporations.

Professional Management with its emphasis on quality indelivery of services.

Continuous efforts to upgrade and improve technological

growth


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ISSUES

rising level of Non-performing Assets in co-opbanks

increasing number of weak and sick urban banks serious irregularities noticed in the functioning of

a large number of district central and urban co-opbanks affecting the confidence and trust of

depositors Critical situation of the textile industry affecting

the prospects of cooperative spinning mills

EmergingIssues And Challenges


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THANK

YOU

mfi- cooperative bank

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