Post on 05-Apr-2018
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8/2/2019 Challenges Before Co-Operative Banks
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CHALLENGESBEFORE
CO-OPERATIVEBANKS
By:-
Mr B. SinghVice Principal,
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CHALLENGES BEFORECOOPERATIVES
Identity.
Competition from CBs and also UCBs.
Technological advancements.
Professionalism and core area of competence. Business diversification.
Resource mobilization.
Government support and control.
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PROBLEMS BEING FACED BYCOOPERATIVES
FINANCIAL IMPAIRMENT Mounting NPAs.
Accumulated losses.
Non compliance with section 11 of BR Act. Erosion of deposits.lar
Dwindling market share.
HUMAN RESOURCES No regular recruitments- ageing staff.
Inadequate qualification as compared to their peers.
Lack of capacity building of staff.
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PROBLEM BEING FACEDBY 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.
MANAGERIAL IMPAIRMENTS 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.
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REVIVAL PACKAGE: OBJECTIVE
Provide financial assistance to bring thesystem to an acceptable level of health.
Introduce legal and institution reformsnecessary for their democratic, self-reliant andefficient functioning; and
Take measures to improve the quality ofmanagement.
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REVIVAL PACKAGE:APPROACH
Financial assistance-one timemeasure only.
Conditional- legal andinstitutional reforms.
States had an option to
participate-MoU.States given 2 years to take adecision.
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REVIVAL PACKAGE:LEGALREFORMS
Reforms in cooperative society Act
Full voting rights to all users incl.depositors.
Ensure periodic election and audit,introduce criteria for eligibility tocontest, and limit powers to supersedeBoards.
Remove administrative interventionsof State Govt. in the financial affairs ofthe cooperatives. Withdraw any otherrestrictive orders.
Prohibit Govt. share capital in CCS.
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Prohibit Govt. participation in boards.
Define and distinguish roles of Boards andExecutive clearly.
Permit wider access for borrowing and investment.
Delimit geographical restriction and permit widerchoice for affiliation to upper tiers.
Cede full financial regulatory powers to RBI forcooperative banks.
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REVIVAL PACKAGE: LEGAL REFORMS
Major recommendation for RBI & GoI
BR Act to be amended to bring coop. banks onpar with comm. Banks while protecting theirdemocratic character.
Amendments to encompass:-
Fit and proper criteria for eligibility ofindividual to contest election to the boards ofcoop banks+cooption of professional withvoting rights if not so elected.
Minimum qualifications for CEOs and approvalof their names
Introduction of CRAR norms in a phasedmanner.
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Prohibiting any cooperative other than acooperative bank as approved by RBI fromusing the words bank, banking cooperativeor banking society.
Prohibiting acceptance of public deposits byany cooperative other than a cooperativebank as approved by RBI.
Empower NABARD suitably to further improve
effectiveness of its supervision.
REVIVAL PACKAGE: LEGALREFORMS
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VAIDYANATHAN COMMITTEERECOMMENDATION
MEETING THE ACCUMULATED LOSSES
PACS Accumulated losses due to all credit business to
be fully covered by GoI grant.
Losses due to non-credit business like PDS, tradingetc. to be fully met by state govt State govt. may avail soft loan form GoI if needed
DCCBs Balance accumulated losses due to credit business
(to PACS+ other member societies)to be shared bystate govt. and GoI (sharing pattern indicated inthe report)
Losses due DCCBs to be borne by DCCB itself DCCB may avail soft loan form GoI if needed.
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MEETING THE ACCUMULATED LOSSES (Cont.)
The central Government will bear 100% of thelosses arising out of direct credit business of PACS.
100% losses out of the agricultural credit businessof 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 nationalpolicy,
The requirement of resources to raise CRAR to 7%, Full cost of technical assistance for human
resources development, computerisation andimproving accounting system.
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IMPLEMENTATION MECHANISMAt national level
A national steering Committee reporting to thefinance Minister every quarter.
With representatives of GoI (MoF- FS), GoI(MoA),NABARD,RBI , two representative of stategovts. Which are under review, two eminent cooperators
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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
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Lack of adequate quantities of risk
capital
Lack of long-term finance to pay for
creation of the necessary
infrastructure and pre-operative
expense
Lack of well trained staff in adequate
numbers at all levels
LIMITATIONS TO GROWTH
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LIMITATIONS TO GROWTH
Globalization
Lack of innovation
Technology
MIS
Cash handling
Data capture and subsequent management
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CO-OPERATIVE BANKSSWOT ANALYSIS (1 OF 2)
WeaknessWeakness
Lack of professionalism: The
members lack right training and
educations that is necessary for
customer satisfaction
Lack of infrastructure: The banks
lack in implementation of latest
technology such as ATMs and
computers
Lack of technical knowledge: The
members generally lack domaincertification i.e. financial degrees etc.
Small area of operation: The bank
operates only in a limited area
Lack of professionalism: The
members lack right training and
educations that is necessary for
customer satisfaction
Lack of infrastructure: The banks
lack in implementation of latest
technology such as ATMs and
computers
Lack of technical knowledge: The
members generally lack domaincertification i.e. financial degrees etc.
Small area of operation: The bank
operates only in a limited area
StrengthsStrengths
Ownership: Members are the owners
and customers of the banks
Business among members: The
bank focuses on the development of
their members
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
Ownership: Members are the owners
and customers of the banks
Business among members: The
bank focuses on the development of
their members
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
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ThreatsThreats
Competition: Increasing focus of
commercial banks towards untapped
rural sector
Increasing interest rates:
Increasing inflation and liquidity
fluctuation results in rise in interest
rate by the RBI
Small network for operation:
Unlike commercial banks, the
cooperative banks operates in alimited area
Changes in Technology: Unable to
adapt to rapid changes in
technological environment
Competition: Increasing focus of
commercial banks towards untapped
rural sector
Increasing interest rates:
Increasing inflation and liquidity
fluctuation results in rise in interest
rate by the RBI
Small network for operation:
Unlike commercial banks, the
cooperative banks operates in alimited area
Changes in Technology: Unable to
adapt to rapid changes in
technological environment
OpportunityOpportunityLarge untapped area for
Expansion: As in India, the major
part of the population lives in villages
Trust in Cooperatives: Better
understanding among the memberand the rural customer
Linkage of Cooperatives: Direct
connection with RBI and other
cooperatives
Government Support: The
government offers subsidies to the
cooperative banks that is in turn
transferred to the customers
Large untapped area for
Expansion: As in India, the major
part of the population lives in villages
Trust in Cooperatives: Better
understanding among the memberand the rural customer
Linkage of Cooperatives: Direct
connection with RBI and other
cooperatives
Government Support: The
government offers subsidies to the
cooperative banks that is in turn
transferred to the customers
CO-OPERATIVE BANKSSWOT ANALYSIS (2 OF 2)
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THANK YOU