COOPERATIVE BANKS IN INDIA

Brief history of urban cooperative banks in India

The term Urban Cooperative Banks (UCBS), although not formally defined, whereas the primary cooperative banks located in urban and semi-urban areas. These banks until 1996, was allowed to lend money only to non-agricultural purposes. This distinction remains today. These banks have traditionally been about community sites working out. In essence, loans to small borrowers and businesses. Today, their scope of operations expanded considerably.

Context of urban cooperative banking movement in India dates back to the late nineteenth century when, inspired by the success of experiments in connection with the cooperative movement in Britain and the cooperative credit movement in society, as Germany was established in India. Cooperatives are based on principles of cooperation - mutual aid, democratic decision-making and free. Cooperatives represent a fresh approach and an alternative to organisaton as against the owner companies, partnership firms and limited companies, which represent the dominant form of business organization.

The incipient

The first known mutual aid society in India was probably "Anyonya Sahakari Mandali organized in the former princely State of Baroda in 1889 under the leadership of Vithal Laxman also known as Bhausaheb Kavthekar. The urban cooperative credit societies in their formative stages were organized on a community basis for to meet the credit needs of its consumer-oriented members. The community of employees "to inculcate habits of thrift and self-help played an important role in popularizing the movement, especially among the middle class and organized labor. From the start, so today it UCBS push historically has been to mobilize savings middle and low income urban groups and credit offers its members - many of whom were among the weakest.

The adoption of the Companies Act, 1904 Credit Unions, however, gave real impetus to the movement. The first cooperative credit society was registered in cities Canjeevaram (Kanjivaram) in the former province of Madras in October 1904th Among the credit companies were the leading pioneer in Bombay Urban (November 11, 1905), No. 1 Military Mutual Aid Accounting Credit Society in Poona (January 9, 1906). Cosmos in Pune (January 18, 1906), Gokak Town (February 15, 1906) and Belgaum Pioneer (February 23, 1906) in Belgaum district, the Kanakavli-Math and Urban Credit Cooperative Weavers Varavade 'Credit Society (March 13, 1906) South Ratnagiri (now Sindhudurg) in the district. The most prominent among the original credit societies were the Mexican city credit cooperation community and sponsored by Thackersey Vithaldas Lallubhai Samaldas established January 23, 1906 ..

Companies Act, 1904 Credit Union was changed in 1912 so that the broad basis for authorizing the organization of credit societies. Maclagan, 1915 Committee was appointed to review their performance and suggest measures to strengthen. The Committee noted that these institutions were well suited to meet the needs of low income strata of society and the media to inculcate the principle of banking among the middle class. The Committee also considered that the urban cooperative credit movement was more viable agricultural community credit societies. Recommendations of the Commission was a long way to establish urban cooperative credit movement in its own right.

In this context it is interesting to recall that during the banking crisis of 1913-14, when no fewer than 57 banks shares collapsed, there was a there was an outflow of deposits from banks for shares of urban cooperative banks. Mac lagan Committee shall examine this case as follows:

"As a fact that the crisis had the opposite effect, and in most provinces, there was a motion to withdraw deposits from non-cooperative and place them in cooperative institutions, the distinction between two types of security which is highly appreciated, and one must prevail, that the latter is partly due to local character and publicity of cooperative institutions, but above all, we think, to connect the government with the cooperative movement.

Under State jurisdiction

Constitutional reforms that led to the adoption of the Law on Government of India in 1919 transferred the theme of "cooperation" of the Indian government to provincial governments. The Government of Bombay passed the first Cooperative Societies Act of the State in 1925, "which not only gave the movement its size and shape, but was a pace setter cooperation and stressed that the basic concept of savings, self-help and mutual help." Other states followed . This marked the beginning of the second phase in the history of the cooperative credit.

It was the general recognition that urban banks have an important role to play in economic construction. This was announced by a number of committees. The Indian Central Banking Committee of Inquiry (1931) found that urban banks have an obligation to help small businesses and middle class people. The Bhansali-Mehta Committee (1939), recommends that companies had met the criteria for the banks should be allowed to work for banks and recommended a combination of these banks. The Co-operative Planning Committee (1946) went on record to say that urban banks were the best agencies for small-stock banks are generally not interested. Rural Banking Committee Hearing (1950), impressed by the low cost of establishment and operation recommended the establishment of these banks, even in smaller places that people Taluka.

The first study of Urban Cooperative Banks was considered by RBI in the years 1958-59. The report was published in 1961, admits that the general framework and economically sustainable urban cooperative banks, stressed the need for a major urban cooperative banks in the new centers and suggested that state governments actively support their development. In 1963 Varde committee recommended that these banks are organized in all cities with a population of 1 lakh or more, and not a single community or caste. Committee introduced the concept of minimum capital requirements and criteria for the definition of the population center, where they were incorporated UCBS.

Duality of control

However, concern about the professionalism of urban cooperative banks led to the view that there should be better regulated. Large banks cooperate with paid up capital and reserves of Rs.1 lakh gathered under the perview of the Banking Regulation Act 1949 with effect from 1 March 1966 and level of supervision of the Bank of Reserve. This marked the beginning of an era of dual control of these banks. Related banking (ie licensing, area of operations, interest, etc.) will be covered by the RBI and registration, management, audit and settlement, etc., are covered by state governments and the provisions of the respective governmental acts. In 1968, benefits were extended UCBS Deposit Insurance.

Towards the end of 1960 there was much debate on the promotion of small industries. UCBS was seen as important actors in this context. Working Group on Industrial Financing through cooperative banks, (in 1968 known as Damry Group) has attempted to broaden cooperation activities in the urban cooperative banks, recommends that these banks to finance small scale and cottage industries. This was confirmed by the GNI Committee on Banking (1969).

Committee Madhavdas (1979) evaluated the role of urban cooperative banks in more detail and drew a roadmap for its future role in recommending support of the RBI and Government in the creation of these banks in the most backward and prescribing standards for sustainability.

Hate Working Group (1981) wanted a better use of excess funds from banks and that the percentage of the cash reserve ratio (CRR) and statutory liquidity ratio (SLR) of these banks should be brought to par with commercial banks in a stepwise manner. While the committee Marathe (1992) redefined the rules for viability and ushered in an era of liberalization, Madhava Rao Committee (1999) focused on consolidation, disease, raise professional standards in urban co-operative banks and attempted to harmonize the urban banking movement with commercial banks.

One aspect of urban banking movement has been its heterogeneity and its uneven geographical distribution, with most banks are concentrated in states of Gujarat, Karnataka, Maharashtra and Tamil Nadu. Although most banks banks without branch networks unit, some of the big banks have established their presence in many countries, when in several instances of government bank was authorized in 1985. Some of these banks are authorized foreign exchange agents

Recent developments

Over the years, the primary (urban) cooperative banks experienced a significant growth in the number, size and volume handled. As on 31 March 2003 there were 2104 UCBS which 56 scheduled banks. Approximately 79 percent of these are located in five states - Andhra Pradesh, Gujarat, Karnataka, Maharashtra and Tamil Nadu. Recently, the problems that a few large UCBS highlighted some of the difficulties faced by banks and policy initiatives designed to consolidate and strengthen this sector and improving governance.