Cooperative Banking : Challenges And Opportunities By Dr. Vigneshwara Varmudy Associate Professor in Economics Vivekananda College Puttur
The Indian cooperative sector is 109 years old. Government took initiative to address the twin issues of farmer's-indebtedness and poverty. Cooperative credit societies Act,1904. At present there are more than 5.5 lakhs of individual cooperative organizations with over 239 million members. To improve the status of these government of India brought about 97 th amendment in 2011 to the constitution Act. Now cooperatives are included in Part-3 of the constitution in Article 19.
An overview of Cooperative Banks State cooperative Banks Apex institution. There are 31 S C B s Network of 1047 branches. Of these branches Himachal Pradesh has 197, Assam 75, Goa 68, Maharashtra 53,Tripura 50, Tamilnadu 46.. 254 Thousands of members.. Overdue : 3.86%
District Central Cooperative Banks. At present there are 371 banks in India. Numbers of branches : 13495. Membership : 3659 thousands. Overdue : 21.88% Performance deteriorating mainly due to operating expenses.
Urban cooperative Banks Area of operation : Urban & Semi Urban. Numbers -1645. 77% banks are located at Maharashtra, Karnataka, Gujarat, Andra Pradesh and Tamilnadu. Here Maharashtra alone accounts for 33% of the total. 4 Grades of banks-gradation based on profit/loss, NPA etc., 1 st Grade -845, in this Maharashtra has 301 and Karnataka 112.
Urban cooperative Banks 2 nd Grade-502-Gujarat(First) Karnataka(Second). 3 nd Grade-172- Maharashtra(First)Karnataka(Second). 4 th Grade-126- Maharashtra(First)Gujarat(Second) Karnataka(Third).
Target Groups- Farmers, Small vendors, labourers, women, physically challenged etc., Advantages-Cost structure, labour cost, lower operating costs, local in nature. Lending Priority sector-46%,housing-26%. Capital to risk weighted assets ratio (CRAR)-91% Minimum of 9%. Net worth 8.7% in 2006-07 to 5.3% in 2010-11 Improvement due to up gradation,amalgamation and liquidation. NPA s Gross 20% in 2005-06 to 12% in 2010.
Drawbacks Lack of corporate governance. Dual control. Political interference. Lack of professionalism. Incidence of financial weakness.
Opportunities Local knowledge. Undeniable edge in the area of relationship banking.
PACS Integral part of short term credit. Grass root level banking. Number-1,12,309(2002-03), 92,432 (2011-12) Membership- 123552 thousands,(2002-03) 1,13,596 thousands. Borrowers 63580 thousands (2002-03) 44886 thousands (2011-12) Villages coverd-96.8-100% in Bihar, Himachal Pradesh, Nagaland, Pondicherry, Sikkim, Tamilnadu, U.P etc., In Karnataka 96.35 of the total 7,02,914 Villages 6,75,382 Villages are having PACS. Overdues- 15,289 crores(2002-03), 24,304 crores(2011-12) Percentage of over dues During(2002-03)-37.90, In (2011-12) was 26.78
Region-wise PACS and Membership- 2011-12 Region PACS Viable Membership (000) Northern 10818 (11.70) 7553 (11.30) 9974 (8.78) 11.48 Eastern 19421 (21.01) 14616 (21.88) 27515 (34.22) 30.64 Central 15357 (16.61) 12480 (18.68) 10697 (9.41) 34.84 Western 29633 (32.06) 20498 (30.68) 17092 (15.05) 7.79 Southern 13703 (14.82) 9719 (14.55) 44623 (39.28) 15.18 North eastern 3500 (3.79) 1947 (2.91) 3694 (3.25) 4.87 Total 92432 (100) 66813 (100) 113596 (100) 100 Number of villages per PACS( IN %)
Borrowers Region-wise Region Total (000) Others Northern 12.12 15.15 Eastern 6.88 13.81 Central 6.00 6.84 Western 17.25 3.50 Southern 58.30 60.30 North eastern 0.25 0.21 Total 4,4886000 (100) 18554000 (100)
PACS-TOP TEN In numbers State Number Viable Maharashtra 21402 15484 U P 8929 7115 Bihar 8463 8463 Gujarat 8154 4960 W B 7962 4291 Rajasthan 5671 4852 Karnataka 4739 3017 Tamil Nadu 4538 3028 M P 4457 3663 A P 2807 2266 Kerala 1566 1383 Total in India 92432 66813
Membership Top Ten State Membership (000) Number of borrowers (000) Kerala 15522.24 11383(1) Maharashtra 14230 3735(4) W.B 12171.60 5310(2) A.P 12056.37 3427 (6) T.N 11426.00 3893 (3) Bihar 9765.00 234 (10) Karnataka 5258.0 1978 (8) M.P 5249.47 2853 (7) Rajasthan 4742.66 3609 (5) Orissa 4316.21 1967 (9) Total in India 113595.62 44885.51
% Of Over dues Region In percentages Northern 29.90 Eastern 35.42 Central 30.35 Western 34.82 Southern 19.68 North eastern 87.48 Total in India 26.70
Over dues (short term) State In percentages Sikkim 100 Mizoram 93.53 Tripura 92.68 Meghalaya 89.24 Nagaland 86.36 J & k 79.92 Pondicherry 56.09 Goa 52.77 Bihar 46.78 Chandigarh 38.46 Kerala 19.96 (23) Karnataka 19.23 (24) India 26.06
% of over dues Agriculture, Non- Agriculture and Others STATE AGRICULTURE NON-AGRICULTURE OTHERS Tripura 96.34 96.32 100 Nagaland 100 100 50.99 Karnataka 17.44 8.81 79.48 Kerala 18.67 20.95 15.21 Maharashtra 37.71 0.00 0.00 W.B 29.89 45.30 60.01 T.N 11.28 37.15 9.20 TOTAL 28.58 22.76 25.25
Staffing Pattern in 2011-12 States Total number of staffs Full time paid secretaries Trained W.B 29434 9267 29434 Maharashtra 28854 24170 14459 T.N 19354 4839 12571 Kerala 18139 3248 12043 Karnataka 13611 4066 7014 Gujarat 14751 6271 6827 A.P 10219 2405 5088 INDIA TOTAL 208697 71297 115058
Challenges Inability to ensure active membership. Serious inadequacies in governance. Lack of recognition as economic institutions both amongst the policy makers and general public. Professional management. Cost competitiveness. Politicization & excessive role of govt. Sickness or non viable nature-of the total 92432-66813 are viable 19975 are potentially viable - 2634 are dormant and 1507 are defunet.
Challenges Latest ruling of NABARD (July 22,2013)- 1) Transfer of asset and liabilities of PACS to DCCB s/scbs. 2) Transfer of deposits. 3) No scope for accepting deposits. 4) Members will have to become the members of DCCBs.
Opportunities 97 th amendment & the precisions. Recent improvement in the functioning. Adoption of modern technology. Provision updated services. Inherent advantages in tackling the problems of poverty alleviation, food security and employment generation. Potential to deliver goods and services in areas where both the state and the private sector have failed.
Cooperatives are the shield of the weak and not the sword of the strong. Thank you