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Abstract

“I know of no other instrument so potentially powerful and full of social

purpose as the co-operative movement”
-Smt. Indira Gandhi

Since India is agriculture oriented country, the importance of co-operative movement

in India is more than any other countries. The development of co-operative movement in

India is on the process but still it is not fully developed. The Co-operative banks in India

was started in 1904.Co-operative movement in India is the result of a deliberate policy of

the state and is vigorously pursued through formation of an elaborate governing

infrastructure. The successive Five-year plans looked upon the co-operation movement as

the balancing sector between public sector and the private sector.

In India we find that the states of Maharashtra and Gujarat are well developed. Whereas

the states of Andhra Pradesh, Rajasthan and Karnataka have shown remarkable progress in

the co-operative movement and there is a vast potential for th e development of co-

operative in the remaining states.

This project is mainly focusing on the importance of co-operative bank movement in the

regional rural areas of our country. The NABARD role in the building of the co-operative

credit structure was that of an active collaborator in drawing up schemes of development

with the government of India and the State Governments, and the provider of finance, first

to the State Governments for contribution to the share capital of co-operative credit

institutions at various levels.

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CO-OPERATIVE BANK MOVEMENT

1. INTRODUCTION TO CO-OPERATIVE BANK MOVEMENT.

1.1 WHAT IS ‘CO-OPERATIVE’?

Co-operatives represent the basic qualities of our people: honesty, democratic

consensus, mutual concern and self-reliance. Throughout our land, there are co-operatives-

large and small which have succeeded. Our day starts with the consumption of milk, the

sugar we use in the preparation of sweets, the ration that we purchase from a fair price

shop, the papad and pickles which add taste to our lunch, the education our children are

imparted, the fish and poultry products that we consume for dinner; the betel nut that we

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chew after dinner and chocolates given to kids put them to sleep, all have some

contribution of the co-operative movement. Indeed, co-operatives have touched our lives

in more ways than one.“India is the ‘land of co-operatives’. The largest numbers of co-

operatives are in our nation.” According to ICA, "a cooperative is an autonomous

association of persons united voluntarily to meet their common, economic, social and

cultural/needs and aspirations through a jointly owned and democratically -controlled

enterprise".

1.2 DEFINITION OF CO-OPERATIVE MOVEMENT

Co-operative movement can be define as a “Voluntary movement of the people, carried

out democratically by pooling together their resources or carrying on the given activity,

with the purpose of achieving or securing certain benefits or advantage which given to

people cannot get individually and with the purpose of promoting certain virtue and values

such as self help, mutual help, self reliance and general goods of all.”

1.3 HISTORY OF CO-OPERATIVE BANK MOVEMENT

Around the world modern cooperatives have developed for over 200 years. Cooperative

institutions exist all over the world providing essential services which would otherwise be

unattainable. In many Third World countries, cooperatives such as credit unions and

agricultural organizations have been very successful in helping people to provide for

themselves where private and other corporate capitals do not see high profitability. In 90

countries of the world, over 700 million individuals are members of Co-operative

institutions. Globally, cooperatives have been able to elevate its position as a powerful

economic model. In some countries they are a sizeable force within the national economy.

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During the British rule, Nicholson a British Officer in India suggested to introduce

Raiffersen model of German agricultural credit Cooperatives in India. As a follow-up of

that recommendation, the first Cooperative Society Act of 1904 was enacted to enable

formation of "agricultural credit cooperatives" in villages in India under Government

sponsorship. With the enactment of 1904 Act, Cooperatives were to get a direct legal

identity as every agricultural Cooperative was to be registered under that Act only. The

1904 Cooperative Societies Act was repealed by 1912 Cooperative Societies which

provided formation of Cooperative societies other than credit. Under 1919 Administrative

Reforms act, Cooperatives was made a provincial subject making each province

responsible for Cooperative development. The impulses of the Indian freedom movement

gave birth to many initiatives and institutions in the post independence era in India and

armed with an experience of 42 years in the working of Multi Unit Cooperative Societies

and the Multi-Unit Cooperative Societies Act, 1942, the Central Government enacted a

comprehensive Act known as Multi State Cooperative Societies Act, 1984, repealing the

Act of 1942.

The Co-operative banks are an important constituent of the Indian Financial System,

judging by the role assigned to them, the expectations they are supposed to fulfill, their

number, and the number of offices they operate. The co-operative movement originated in

the West, but the importance that such banks have assumed in India is rarely paralleled

anywhere else in the world. Their role in rural financing continues to be important even

today, and their business in the urban areas also has increased phenomenally in recent

years mainly due to the sharp increase in the number of primary co-operative banks.

Cooperative banks in India finance rural areas under:

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 Farming

 Cattle

 Milk

 Hatchery

 Personal finance

Cooperative banks in India finance urban areas under:

 Self-employment

 Small scale units

 Home finance

 Consumer finance

 Industries

2.CO-OPERATIVE MOVEMENT IN INDIA

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In India the Co-operatives officially appeared through a Cooperative Society’s Act in

1904 during the British rule and subsequently it took a great shape after the independence

in 1947. Since the independence the Indian Government led by Pt. Jawaharlal Nehru saw

the social, economic and egalitarian potential of co-operation in moulding Indian society.

While addressing the Indian Cooperative Congress in April, 1958 Pt. Nehru said “the

whole idea behind the cooperative movement has appealed to me for a large number of

years even though I was not personally connected with it, I was attracted by the

philosophy underlined it. If we value, individual freedom, as many of us do, how are we to

find a great balance between the individual freedom and at the same time get away from

the clutches of an acquisitive society. The cooperative movement seems to offer a

philosophy, a method of approach, which would aim at this kind of social pattern.” In

April, 1959 while addressing the Parliament he said “I should like to place a certain aspect

before the House.

We talk about the cooperative movement. But I should like this matter to be considered

from an even broader point of view, of reorganizing our vast rural areas, of building of a

new social structure. Hither to, the Community development movement has sought to

make people living in the rural areas self reliant, working together, cooperating, building

of their villages and generally advancing more specially on the agricultural front.Now the

cooperative comes and gives these aims an institutional character. This has to be an

attempt on a magnificent scale.” In pursuant to the above theme given by Pt. Nehru, the

cooperative movement in India underwent several phases in consolidating the poor, the

rural, the artisans, and the farmers etc. to join together in forming their respective

cooperative societies and made the umbrella bigger and bigger to attain the objectives laid

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down by Pt. Nehru for the poor country like India. The National Cooperative Union of

India (NCUI) was established in 1929 as an apex promotional organization for promoting

and strengthening of cooperative sector, providing education and training in cooperative,

propagation of cooperative ideology and research in cooperatives, international

cooperative relations, cooperative planning and information services. Similarly, a National

Cooperative Development and Warehousing Board were set up in 1956, in pursuance to

the recommendations of the All India Rural Credit Survey Committee (1954) under the

aegis of the Reserve Bank of India. The National Cooperative Development Corporation

(NCDC) was established in March, 1963 by the Government of India under NCDC Act

1962 as a successor organization to the above Board, with an objective of “planning and

promoting programs for production, processing, marketing, storage, export and import of

agricultural produce, foodstuffs and certain other notified commodities and collection,

processing, marketing, storage and export of minor forest produced on cooperative

principles.” NCDC since then have been playing a very crucial role in promoting the

cooperatives on the above said objective. India unlike the developed countries started the

cooperative movement with the poor people so as to share the benefit with the poor in

improving their quality of life. In some countries, we come across very small community

based cooperatives and large industrial cooperative establishment which are sometimes

difficult to distinguish from other industrial enterprises but their service to members is

unique. In India the industrial cooperatives in the fertilizer sector, milk sector, sugar sector

which have come up a long way to compete with the big industries have maintained their

structure of primarily serving to the poors.

2.1 PRINCIPLES OF CO-OPERATIVE MOVEMENT

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There have been also other principles like the principles of political neutrality, correct

weight and measures, purity of goods and thrift which were also taken into consideration.

These principles have been reformulated recently by the Manchester Congress in 1995 and

now the principles of co-operation are as follows:

I Principle: Voluntary and Open Membership:

Co-operatives are voluntary organizations; open to all persons who use their services and

willing to accept the responsibilities of membership, without gender, social, racial,

political or religious discrimination.

II Principle: Democratic Member Control:Co-operatives are democratic organizations

controlled by their members, who actively participate in setting their policies and making

decisions. Men and women serving as elected representatives are accountable to the

membership. In Primary co-operatives members have equal voting rights (one member,

one vote) and co-operatives at other levels are also organized in a democratic manner.

III Principle: Autonomy and Independence:

Co-operatives are autonomous, self-help organizations controlled by their members. If

they enter into agreements with other organizations, including governments or raise

capital from external sources they do so on terms that ensure democratic control by their

members and maintain their co-operative autonomy.

IV Principle: Education, Training and Information:

Co-operatives provide education and training for their members, elected representatives,

managers and employees so that they can contribute effectively to the development of

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their co-operatives. They inform the general public particularly young people and opinion

leaders about the nature and benefits of co-operation.

V Principle: Co-operation among Co-operatives:

Co-operatives serve their members most effectively and strengthen the co-operative

movement by working together through local, regional, national and international

structures.

VI Principle: Concern for Community:

Co-operatives work for the sustainable development of their communities through policies

approved by their members. The seventh Principle was added at the Manchester Congress

of 1995.

2.2 OBJECTIVES OF CO-OPERATIVE MOVEMENT

1) Service to the people:

The primary objective of the co-operative body is to take care of its members and the

community as a whole. Their primary aim is to serve the people, without becoming too

commercial like the private sector.

2) Equal distribution of Income and Wealth:

The main objective of co-operatives is to share the income and wealth amongst its

members. The members will reap the fruits of success in the form of wealth and share the

same fruit in times of crisis.

3) Monopoly in Control:

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One of the main roles of co-operatives is to arrest the monopolistic situation of the market.

In many countries, the MNC’s create a monopoly of some products. In such areas, the co-

operatives enter and curb the monopolistic status earned by the MNC’s.

4) To increase the income of the people, thereby improving their economic conditions:

Co-operatives play a pivotal role in bringing about a change in the standards of living for

many rural people. They provide employment opportunities and serve the needs of the

members financially as well as help in upgrading social development.

5) Reduction in cost of production:

Co-operatives follow the strategy of backward integration. They make their own raw

materials and hence, reduce the cost of production. As members themselves play a major

part in running the co-operative, the labour cost is considerably reduced. The Co-

operatives pass on the benefits of low cost to the customers by pricing their goods at the

reasonable rates.

6) Protection of consumers:

The ultimate aim of a co-operative organization is to protect the interest of its consumers.

Co-operatives also follow fair means of running the institution. No exploitation in the

product, price etc is done by the co-operatives.

7) Self- help and mutual help:

Co-operatives follow the principle of ‘EACH FOR ALL, ALL FOR EACH.’ A member of

a co-operative develops himself, and also develops the members of co-operative and the

society as a whole.

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8) Development of certain economic activities:

The main role of co-operatives is to develop the economy in rural areas. Co-operatives

have played a multifaceted role in developing the sectors, especially in areas of forest

produce, honey, silkworms, fruit processing etc.

9) Prevention of exploitation of working class:

Co-operatives help protect the working class from the exploitation by the owners. In some

countries, co-operatives have developed as an offshoot to capitalism. As workers form

their own co-operative body, they help each other and stand united for a common cause.

10) To develop the backward classes and poor:

Co-operatives have been formed to counteract the problems faced by the backward classes

and the upper classes in villages. Many co-operatives have also begun to overcome the

problems of poverty.

3. DEVELOPMENT OF CO-OPERATIVE MOVEMENT IN INDIA

In 1904 the co-operative act was passes as a part of co-operative movement in India. The

act can be studied as under:

Beginning Period of Co-operative Movement in India (1904-1912):

The Indian co-operative movement started on 25 March 1904 with the passing of an act.

The objectives are as under:

1. Establishment of co-operative societies.

2. Legal existence.

3. Control of Registrar.

4. Free audit of accounts by the registrars.

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5. Classification of rural and urban societies.

6. Responsibilities of members.

7. Limits on the distribution of dividend.

8. Loans to members.

9. Interest of members in society.

This stage has been termed as the primary stage in the development of co-operative

societies because the promoters had no idea of cooperation and had very less experience

about it.

Year No.of societies Membership Capital

(in 000’s) (in lakhs) (in crores)

1939 122.00 53.07 106.47

1943 146.00 69.01 121.14

1946 172 91.6 104.00

1947 139.00 90.00 156.00

Due to the bifurcation in 1947 some of the co-operative societies had been shifted to Pakistan

thereby reducing the number of societies, its membership and capital. During 1939-1946 the

field of co-operative movement was spread over a large scale.

6. The Sixth Stage (1947-1970):

After attaining independence the government felt that co-operatives should play an

important role in the development of rural areas. The late Prime ministers Jawaharlal

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Nehru and Lal bahadur shastri stressed on the importance co-operatives. Co-operatives

were included in 5 year plans.

7. The Seventh Stage (1970- 2000):

During this period the government laid more importance on the development of rural

banking sectors. Co-operatives were asked to develop rural banks. The formation of

NABARD as an apex bank was formed for monitoring the co-operative bank. The

government also took the initiative in replicating the Anand pattern Model for dairy

cooperative across the country.

8. The Eighth Stage (2000 onwards):

The rise of the new millennium has thrown many challenges to the cooperatives. The

WTO restrictions and the threat from global co-operation have grown. The co-operatives

have to face direct competition from multinationals. The government is providing

adequate support and help to the co-operatives by building brands, distribution network

and also in exporting their products to global market.

4. ROLE OF BANKS IN DEVELOPMENT OF CO-OPERATIVE MOVEMENT.

A) Role of Central Govt. in the Development of the Co-op. Movement:

a) The Central Govt. initiative started with the passing of the legal framework pertaining

to the co-op. movement in 1904 with the passing of the Co-op. Societies Act.

b) The Govt. amended the act in 1912.

c) Govt. provided protection to co-op. societies from the restrictive provision of certain

laws such as farmers debts relief act, etc.

d) Expert committees were appointed from time to time and policy changes were made

depending on the recommendation and suggestions by these committees.

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e) Govt. provided financial assistance to the co-op. organization.

f) An independent co-op. department was established to deal with the problems of the co-

op. movement.

g) Govt. provides assistance in the form of contribution and guarantees for loans secured

by co- op. institution.

h) Govt. provides privileges in the form of special concessions and tax exemptions

w.r.t. income tax, registration fees, etc.

B) Role of the State Govt. in the Development of the Co-operative Movement:

a) The state provides direct assistance by subscribing to the share capital of co-op.

organizations such as co-op. banks, co-op. marketing federations, etc.

b) Indirect assistance is also provided by the state to enable co-op. credit societies to

purchase shares of any other co-op. organization with limited liability.

c) The State Govt. gives guarantee in the following respect:

d) Repayment of loans

e) Repayment of share capital of the societies to their members

f) Payment of dividend, etc. at prescribed rate

g) The State provides assistance in the form of subsidies

h) The state provides concession w.r.t. stamp duty, sales tax, etc.

i) Training facilities are provided to personnel of co-operative organizations

j) The govt. also controls the working of the co-op. organization through periodical audit

and administrative measures so that the co-ops. Function according to law.

6. TYPES OF CO-OPERATIVES

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The Co-operative Movement was introduced into India by the Government as the only

method by which the farmers could overcome their burden of debt and keep them away

from the clutches of the money-lenders. The Co-operative Credit Societies Act, 1904 was

passed by the Government of India and rural credit societies were formed.

(1)The Primary Agricultural Credit/Service Societies:

The agricultural co-operative credit structure in the Punjab State is broadly divided into

two sectors, one dealing with the short-terms and medium-terms finance and the other

with the long-term credit. In the State, the short-term and medium-term credit structure is

based on a three-tier system, i.e. the Apex Co-operative Bank at the State level, the

Central Co-operative Bank at the district / tensile level and the Primary Agricultural Credit

Societies at the village level. The major objectives of the primary agricultural credit

service societies are to supply agricultural credit to meet the requirements of funds for

agricultural production, the distribution of essential consumer commodities, the provision

of storage and marketing facilities and for light agricultural implements and machinery.

The first Agricultural Credit Society in the Firozpur District was registered on 4 October

1911, at the Village of Khalchi Kadim in the Firozpur Tensile. Originally, the movement

was confined to the credit societies only and, thus, credit dominated till the partition

(1947).After the partition, the Co-operative Movement began to spread to other field, viz

labor, construction and farming. In 1979-80, the number of agricultural cooperative credit

societies in the District was 309 with a membership of 1, 21,761. The loan advanced

during the same year amounting to Rs. 2,180.35 lacs and the deposits to Rs. 26.84 lacs.

(2) Agricultural Non-Credit Societies:

When the non-credit societies were brought officially under the protection of the

Movement. The World War II came as a God send boon with respect to the development

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of the Cooperative Movement. Prices of agricultural goods began to rise and touched new

peaks. The repayment of loans was accelerated and deposits began to increasing. The

number of societies also rose. Another interesting development in co-operative during the

War was the extension of the Movement to non-credit activities, namely consumer’s co-

operative marketing societies, integration of societies, etc.

(3) Agricultural co-operative Marketing Societies:

Marketing has occupied a far smaller place in the co-operative picture in India than in

many countries. The full utilization of loans advanced depends upon the arrangements for

the marketing of surplus produce. These societies also provide other agricultural Facilities

and make arrangements for the supply of domestic items in the rural areas. At the State

level, the Punjab State co-operative Supply and Marketing Federation is playing an

important role in building up an integrated structure for remunerative marketing and

storing of agricultural produce. It has played an important role in the Green Revolution in

the State by arranging ready supplies of essential farm inputs needed by the cultivators.

(4) Co-operative Farming Societies:

The Royal Commission on Agriculture in 1928 observed that it co-operation failed, there

would fail the hope of the Indian agriculturist. Under this system, all landowners in a

village form a co-operative society for cultivate the land. The land is combined, but each

farmer retains the right of property. They are allowed to withdraw from the cooperative

farm whenever they desire. In India, the exceedingly small size of holdings is perhaps the

most serious defect in our agriculture. If agriculture has to be improved, the size of the

holdings must be enlarged. The co- operative farming societies, thus, enable the

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cultivators to enjoy the economies of large-scale farming through the pooling of land

management resources.

7. THE LEADING BANKS WHO HELPS IN CO-OPERATIVE BANK MOVEMENT

7.1 INTRODUCTION OF CO-OPERATIVE BANKS

In the early 20th century, the availability of credit in India, more particularly in rural areas

was nonexistent. There was no organized institutional credit for agricultural and related

activities. People in the rural areas largely depended on money lenders who lent money at

very high rates of interest. Thus, there was need to create an institution which would cater

to the needs of ordinary people and was based on the principles of co-operative

organization and management. In 1904, the first legislation on cooperatives was passed. In

1914, the Maclagen committee suggested a three tire structure for cooperative banking i.e.

Primary agricultural credit societies at the grass root level, Central cooperative banks at

the district level and State cooperative banks at the state level. Cooperative banks were

expected to serve as substitutes for money lenders, and provide both short term and long

term institutional credit at reasonable rates of interest.

7.2 FEATURES OF CO-OPERATIVE BANKS

1) Cooperative banks are organized and managed on the principal of cooperation, self

help and mutual help. They function with the rule of “one member, one vote”. Function on

“no profit, no loss” basis. Co-operative banks, as a principle, do not pursue the goal of

profit maximization.

2) Co-operative banks perform all the main banking functions of deposit mobilization

supply of credit and provision of remittance facilities.

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3) Co-operative banks provide limited banking products and are functionally specialist in

Agriculture related products. However, co-operative banks now provide housing loans

also.

4) Primary Agricultural credit societies provide short term and medium term loans.

5) Co-operative banks do banking business mainly in the agriculture rural sector.

However, UCBs, SCBs, CCBs operate in semi urban, urban and metropolitan areas also.

6) The SCBs, CCBs and UCBs can normally extend housing loans up to Rs. 1lakh to an

individual.

7.3 CATEGORIES OF CO-OPERATIVE BANK:

There are two categories of the co-operative banks:

a) Short term lending oriented co-operative banks – within this category there are three

sub Categories of banks viz. State co-operative Banks, DCBs, PACs.

b) Long term lending oriented co-operative banks – within the second category there are

land development banks at three levels state level, district level and village level.

The co-operative banking structure in India is divided into following main 5 categories

1) Primary Urban Co-operative banks

2) Primary Agricultural Credit Societies

3) District Central Co-operative banks

4) State Co-operative Banks

5) Land Development Banks

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7.4 STRUCTURE OF CO-OPERATIVE BANKS

The cooperative structure in India consists of different constituents. At the bottom of this

structure are the primary societies which render various types of services. Of this large

number about 80% is concerned with agriculture. Most of these societies, about 60% deal

with credit only. Thus a large majority of primary societies are related to agriculture and

credit. They perform various functions such things as credit, irrigation, marketing,

transports etc. These are generally divided into two groups (i) credit societies and (ii) non

credit societies Each of these two sub groups is further split up into sub groups :( a)

agricultural societies and (b) non –agricultural societies. Agricultural societies (both credit

and non credit are found in rural areas, but non agricultural scoieties9both credit and non

credit) are found in urban areas. For supervision and financial assistance to cooperative

credit societies there are central banks and state cooperative banks. The central banks

supervise the functioning of the primary societies of a district or art of a district and offer

financial assistance to them their capital is drawn from public deposits, share capitals and

loans from other sources. Because of variety of sources from which these banks can draw

money, they act as a link between cooperative societies and the money market. They

function as balancing centers by diverting funds of surplus societies to the needy societies.

They also perform ordinary banking functions also. At the top of the cooperative credit is

the state cooperative bank, at the state level, known as the apex bank. It controls the

working of central banks and provides finance to them. It also acts as the link between

reserve bank of India from which it borrows and the central banks and primary

societies. It directs the cooperative movement in the state. Its capital comes from share

capital, public deposits and loans and advances from the state and Reserve bank of India.

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The National Cooperative Union of India is the apex organization promoting the

cooperative movement in the country. All the above three types of institutions are

concerned with short and medium term credit of people. Long term loans are given by

Land Development banks,which has a unitary structure having branches at different

places. These banks obtain their funds from share capital, reserves, deposits, issue of

bonds and debentures. However the major part of their resources is drawn from the

floating of ordinary debentures in the market. The investors in these debentures are LIC,

commercial banks, Cooperative banks, central and state governments and Reserve bank of

India.

Share of Cooperatives in National Economy - in per cent

%

Rural Network(Villages Covered)

100.00%

Agricultural Credit Disbursed by Coops

46.31%

36.22%
Fertilizer Disbursed (6.103 million Tones)

Fertilizer production (3.293 M.T. - N&P) Nutrient

27.65%

Sugar produced (10.400 million tons)

59.0%

Capacity Utilization of Sugar Mills

111.5%

31.8%
Wheat Procurement (4.50 million tons)

Animal Feed Production/Supply 50%

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Retail Fair Price Shops (Rural + Urban) 22%

Milk Procurement to Total Production 7.44%

Milk Procurement to Marketable surplus 10.5%

Ice Cream Manufacture 45%

Oil Marketed (Branded) 50%

Spindale in Co-operatives (3.518 million) 9.5%

Cotton Marketed / Procurement NA

Cotton yarn/Fabrics Production 23.0%

Handlooms in Co-operatives 55.0%

Fishermen in Co-operatives (Active) 21%

Storage Facility (Village level PACS) 65.0%

Rubber processed and marketed 95.0%

Areca nut processed and marketed 50%

1.07
Direct employment generated
million
Self-Employment generated for persons 14.39
million

Salt Manufactured (18,266 Metric Tons) 7.6%

Cooperation in a vast country like India is of great significance because:

 It is an organization for the poor , illiterate and unskilled people

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 It is an institution of mutual help and sharing

 It softens the class conflicts and reduces the social cleavages
 It reduces the bureaucratic evils and follies of political factions
 It overcomes the constraints of agricultural development
 It creates conducive environment for small and cottage industries

The statistics here indicates that modern cooperative movement has made tremendous
progress in every walk of its activities and occupies a major place in the share of the
national economy.
7.5 CREDIT STRUCTURE OF CO-OPERATIVE BANK

CO-OPERATIVE CREDIT
ORGANISATION

Ssssssssssssssssssshort
Short term and small term loans Long term

(Three tier system) (two tier system)

State co-operative banks (SCBs) Central and development bank

(At state level)

District central co-operative bank Primary land development bank

(At district level) (At taluka level)

Primary agricultural co-operative

Credit societies

1) The PACSs:
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The Primary Agricultural Credit Societies (PACS) constitute the `hub’ of the Indian co-op

movement. Every fourth co-operative in India is a primary credit society. The main

objectives of a PACS are:

 To raise capital for the purpose of giving loans and supporting the essential activities of

the members.

 To collect deposits from members with the objective of improving their savings habit.

 To supply agricultural inputs and services to members at remunerative prices.

The Primary Agricultural Co-operative Societies

Indicators Value

Village covered by PACS 99.5%

Total Number of PACS 100000

Membership per PACS (Average) 10,00,00,000

2) The DCCB

The PACS are affiliated to the District Central Co-operative Banks (DCCBs) who perform
the following functions.

 Serve as balancing centre in the district central financing agencies.

 Organize credit to primaries.
 Carry out banking business.

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District Central Co-operative Banks

Indicators Value

No. of Banks 361

Total membership (Million) 1.579

Total loans advanced Rs.326,995Million

3) The SCBs:

The DCCBs in turn are affiliated to State Co-operative Banks (SCBs), which perform the
following functions.

 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

States Co-operative Banks:

Indicators Value

No. of Banks 28

No. of branches 742

Total membership 139,676

5) Primary Land Development Banks (PLDBs)

The establishment of the Land Mortgage Bank (LMBs) on cooperative lines dates back to

the year 1920 in Punjab. Later during the period 1920-29, a number of LMBs were

established in the states of Punjab, Madras, Mysore, Assam and Bengal. After that not

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much growth was observed in the number of LMBs till 1945. However, during 1945-53 a

rapid growth was observed in the number of these banks. During this period only rich and

affluent farmers derived benefits of these banks and small and marginal farmers remained

untouched of the developments. LMBs got massive support from the RBI, SBI, LIC and

Agricultural Refinance Corporation. As a result LMBs had to reorient its lending policies

in favour of marginal and small farmers. LMBs were renamed as Land Development

Banks (LDBs) in 1974. Primary LDBs are generally organized to serve the farmers at

Taluka level. Its specific functions are:

(i) To provide long term finance to the needy farmers for the development of land,

Increasing production and productivity of land.

(ii) To provide long term loan for minor irrigation and for redemption of old debts and

purchase of land.

(iii) To provide long term finance for purchase of tractors, machinery and equipments and
Construction of farm structures; and

(iv) To mobilize rural savings.

5) Central Land Development Bank (CLDBs)

In many states PLDBs are federated into CLDBs. Branches of CLDBs, PLDBs and

individual entrepreneurs are the members of the CLDB. NABARD and LIC subscribe for

its debentures in large amounts. In fact, NABARD is the refinance agency of CLDBs. It

acts as a link between NABARD and the Government in long-term business transactions.

It supervises and guides the PLDBs. It inculcates the practice of thrift among member

banks by mobilizing savings and stimulating capital formation. The CLDBs provides

loans to member banks for the redemption of old debts, improvement, reclamation and

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development of land, purchase of agricultural machinery and equipment and development

of minor irrigation.

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7.6 INTRODUCTION OF RURAL CO-OPERATIVE BANKS

Co-operative banks, another component of Indian banking system, originated with the

enactment of the co-operative credit societies Act of 1904, which provided for the

formation of co-operative credit societies. Under the Act of 1904, a number of co-

operative credit societies were started. Co-operative banks were established in India to

facilities rural credit, and to cater to the needs of small farmers and businessmen. They

were popular with middle and lower income groups because of the high interest rates they

offered as compared to commercial banks. However, with the passage of time, most co-

operative banks lost their purpose. Excessive state control and politicization further led to

their deterioration. By the 1990’s, none of the privet or public sector banks were willing to

deal with co-operative banks and thus even otherwise healthy co-operative banks were

facing a tough time. In 2001-2002, many co-operative banks were rocked by scams that

exposed the malpractices in these banks. Many of these banks did not adhere to the

prudential norms prescribed by the Reserve Bank of India. The distinct point between the

co-operative banking sector and commercial banking sector is the focus. First, co-

operative banks focus on the local population and micro banking among middle and low

income state of the society. As compare to nearly 300scheduled commercial banks,

inclusive of regional banks, there were more than 90000 primary agricultural credit

societies in rural sector as at the end of 2002.Co-operative banks are an important segment

of the organized sector of the Indian banking system. They have been organized under the

provision of the co-operative society’s law of the states. They have grown with the

specific purpose of financing agriculture and other economic units in the unorganized

sector of the economy.Both commercial banks and co-operative bank perform the main

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banking functions of deposit mobilization, supply of credit, and provision of remittance

facilities. The major beneficiary, in the case of commercial bank, is industry, trade and

commerce whereas co-operative bank have been concern with agricultural finance.

7.7. THE SCHEMES OF RURAL CO-OPERATIVE BANKS AND ITS PROGRESS.

The Government while understanding the importance of co-operatives has introduced

several schemes for promoting the spirit of co-operation. Both the Indian Government as

well as the Government of the State of Maharashtra has introduced several schemes for

the co-operatives. A few of them are listed here. Take benefit of them.

Scheme 1:

Share Capital Contribution to Credit Institutions under LTO Fund (State Level Scheme)

The Government sanctions share capital contribution to District Central Co-operative

Banks. This contribution is given out of the LTO Fund of the NABARD. The provision is

made every year to repay this loan.

Scheme 2:

Loans to Co-operative Credit Institutions for conversion of short term loans into medium

term loans.

Scheme 3:

National Agricultural Credit Stabilization Fund (Centrally Sponsored Scheme) In drought

conditions the members of Agricultural Credit Societies may not be able to repay the crop

loans. This scheme helps to convert their short-term loans into medium term loans and

fresh crop loans are made available to the members.

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Scheme 4:

Crop Production Incentive to Agriculturists (Dr.Punjabrao Deshmukh Crop Production

Incentive Scheme) this scheme is applicable for Kharif and Rabbi Crops taken from 1.4.90

onwards. The farmers borrowing loans of RS.25, 000 or less and who repay their loans

fully before the due date are eligible for 4 % of the principal amount as an incentive.

Scheme 5:

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

has several schemes.

1) The Government sanctions share capital in the ratio 1:3, to enable the societies to

borrow funds from the financial institutions.

2) Financial Assistance for Tools and Equipment's.

3) 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 women’s co-

operatives. The financial assistance is as under

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Working
No. Item Share Capital Subsidy Total
Capital

1.New Societies 40,000 40,000 20,000 1, 00,000

2, 00,000
2.District
80,000 80,000 40,000
Federation

3.State Federation 2, 00,000 2, 00,000 1, 00,000 5, 00,000

Scheme 7:

Co-operative Go downs: The Warehousing Corporation 90% assistance for the construction
of go down out of which 50% is loan and 40% is Government share capital.

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REFERENCES

Books Referred:

 Co-operative movement in world book.

Websites:

 www.google.com.

 www.co-operative bank movement.com.

 www.rbi.org.in.

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