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org © 2022 IJCRT | Volume 10, Issue 10 October 2022 | ISSN: 2320-2882

A INDUSTRY ANALYSIS ON COOPERTIVE

BANKING SECTOR IN INDIA

Mr.Hemantha Kumara MG Dr. Sudhindra Bhat

Assistant Professor, Professor, ,Srinivas University, Mangaluru
Department of MBA,PESITM, Department of Commerce and Management
Shivamogga, Srinivas University, Mangaluru
OrcidID : 0000-0001-7107-7871 OrcidID : 0000-0001-6237-6626
Email : [email protected] [email protected]

Introduction
In pre-independence India, the British Indian government reiterated the English model in the co-operative
sector, and the Co-operative Credit Societies Act, 1904 was passed in India for the first time to reorganize
the Indian co-operative society, based on Sir's recommendations. Frederick Nicholson and Sir Edward Law
(1901). This move by the British Government of India addresses the issue of indebtedness in India and the
resulting situation for farmers in the country. The Act encouraged the formation of credit unions across the
country, which led to the formation of the first urban co-operative credit union in Tamil Nadu in October
1904. This was the first phase of the establishment of a co-operative banking system, and it was there.
several errors in the Act have limited the achievement of the intended benefits of co-operatives across the
country. The law allowed credit unions to register, but it did not make provision to protect non-credit
organizations or state-owned enterprises. The government recognized these shortcomings, and to address
them, a comprehensive law, known as the Cooperative Societies Act of 1912, was introduced. Approved the
formation and organization of central Indian co-operatives and non-debtors. Even after enduring many
hardships during that time, the union maintained a positive post-independence trend, and it became part of
economic progress. India's First Five-Year Plan recognizes the importance of co-operatives in the
implementation of development goals, with a focus on farmers and the poorest sections of society. To
address the problem of rural debt and other financial concerns in the rural community, the Indian
government established the All India Rural Credit Survey Committee. Indian Cooperatives Banks are
regulated by the Reserve Bank of India and the National Bank for Agriculture and Rural Development
(NABARD) under the Banking Regulation Act, 1949 and the Banking Act (Application for Cooperatives)
Act, 1965, respectively. Basic co-operatives, central co-operatives, government co-operatives, and urban co-
operatives are the four basic types of co-operative banks. The primary function of co-operative banks is to
provide financial support for small and medium-sized small financial services. It collects funds from its
members and distributes them.

Publications or Literature Review

Table 1 summarises the findings of a study undertaken in India and overseas on the cooperative banking
sector. The papers proposed shed light on growth, business processes, and cooperative banks' involvement
in the country's economic model. In the given period, the importance and role of cooperative societies in
financial stability has been explored under several headings.

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Table 1 : Cooperative sector and its role in Indian Financial system

Serial No Theory Focus References
1 In this study the The study involves the A study on
Author conducted customers feedback in cooperative Banks in
the study to identifying the bank’s India with special
understand the lending methods and reference to Lending
lending practices of satisfaction with the bank. practices by Jyoti
cooperative banks Gupta and Suman Jain
and their efficiency / volume 2
based on the
lending practices.
Researcher used the
descriptive method
of study by
preparing the
questionaries and
interviews
2 In the current study Researcher conclude the Sources and
the researcher study with the basic Applications of funds
trying to identify suggestion to UCB to in UCB in composite
the funds sources increase the number of Thanjavur District. :
and at the same customers by providing more Dr S
time he is trying to offers. Mayilvaganan and G
identify how these Prabhakaran/ volume
funds are invested 3 IJCRD
in earning more
returns
3 Here the researcher He concludes his research A study on the
tries to identify the with the lower rate of interest effectiveness of fund
fund management charged from the bank to its management at
procedures and the customers and he also Bangalore District
banks performance suggested the bank to and Bangalore Rural
based on the increase the applications of District cooperative
selected financial funds in Loans and advances bank” Pavan G
operations Kulkarni ISSN 0039-
2049
4 The researcher And the researcher also put Current scenario of
wanted to study the his concerns regarding the state co-operative
significant role minimum help from bank in India and its
played by government to the working performance
cooperative banks cooperative banks. by G. Subash Chandra
in economic Bose and Dr P
development Nagarajan.

5 Here the researcher The study the types of loan To study the pattern
wanted to study the and advances provided by the of lending Practices in
lending practices banks and how far the Urban cooperative
and to compare the customers are satisfied with banks in Delhi by
efficiency of urban the service of these banks in Supreeta Gaba and Dr
cooperative banks Delhi Bharat Bushan ISSN :
in Delhi. 2320 2882

6 Here the study They found that public sector A study on

suggested that banks have been more
Cooperative Banks in
performance of efficient than other banks
banking in terms of operating in India India with special
profitability,
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productivity, asset reference to Lending

quality and
Practices Boppana
financial
management has and Nagarjuna (2006
become important
to stable the
economy
7 This paper aims to The role of co-operative Research on
analyze the banks in rural and urban Cooperative Sector
problems and areas has increased Banks in India:
prospects of the significantly today due to the Problems and
banks of the Indian expansion of co-operatives Prospects | Indira R.
co-operative sector and their major role in *, Paramashiaviah
and its integration financing rural and urban Year: April, 2019
into the Indian areas is increasing day by Volume: 16 / Release:
economy. day. 5
8 Co-operatives are The UCB sector is very
successful business diverse in material size and Urban Cooperative
organizations faces a number of challenges
around the world related to business modeling, Banking in India: Key
and exist in almost governance, and professional
every sector of the management. Issues and Way
economy, including
banking and Forward
financial services. ISSN 2349-7483.
Volume VIII, No 11,
June 2021.
9 The banking A study on Co-
business has done Bank performance checks operative Banks in
wonders for the and lending procedures India ,Vol. 1, Issue: 7,
global economy. A offered to customers are September2013
simple way to conducted here ISSN:(P)2347-5404
accept cash deposits ISSN:(O)2320-771X
from depositors and
borrow the same
money from
borrowers, banking
activity promotes
cash flow in
productive spending
and investment.

10 There is currently a Implementation of the Current Scenario of

branch of the technology required by banks State Co-Operative
Federal Bank of to redesign processes, Bank in India and Its’
India with a total networking and delivery of Working Performance
population of about alternative service delivery - A Study
1070035.33 in services such as online International Journal
India, based on the banking, mobile banking and of Science and
2011 population. mobile banking, data storage Research (IJSR) ISSN
and data mining, customer (Online): 2319-7064
relationship management, Index Copernicus
integrated treasury Value (2016): 79.57 |
management, human resource Impact Factor (2017):
management and 7.296
implementation. of major
banking solutions.
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Objectives of cooperative Industry Analysis

1. To understand the structure and function of Indian cooperative system.
2. To study the growth of cooperative sector in India pre and post-independence
3. To identify the major opportunities for cooperative banks.
4. To analyse the challenges faced by cooperative banks.

Internal Analysis :
4.1 Products and services :

Indian cooperative banks provided the following Products and services to their customers. Most of the
cooperative banks offer all type of services what other regular banks offer to their customers. Below are
soe of the products and services offered by them.
1. Loans to small borrowers and small Businesses
2. Working capital and term Loans
3. Various deposit schemes
4. Advances against shares and Debentures
5. Deposit facilities similar to other banks.

4.2 SWOC Analysis of Cooperative Banks in India

Strengths :
1. These banks have ethical policies which safeguard the investors.
2. Cooperative banks main target of customers are from rural and semi urban areas.
3. The banks provide all type of facilities to its customer with related to latest technology.
4. RBI, Central and state govt are the back bone for these banks.

Weakness
1. These banks are much controlled by govt bureaucrats.
2. They have more restrictions in terms of loan approvals
3. Collection policy is not much effective and active
4. These banks can provide financial support for only small entreprises.

Opportunities
1. Since India got strong rural background, these banks can operate in all places.
2. Most of the commercial banks are underperforming due to wrong policies, cooperative banks have
got huge opportunity to expand.
3. Rural and semi urban living people prefer cooperative banks for their financial needs.
4. Enough government funding facility is available for these banks.

Challenges :
1. These banks are facing the challenge of recovery and debt.
2. High transaction cost and administration cost due to low level of technology.
3. More competition in the market by other commercial banks with huge financial services.
4. Lack of administration and management skills in the management level.

ABCD Analysis
In the research many methods are available to analyse the industry and its constituents. Out of this ABCD
analysis is one of the new techniques in identifying the potential capacity of particular industry. The
cooperative sector which falls under banking industry has its own strength and challenges, these areas can
be identified and collated using ABCD analysis(Advantages, Benefits, Constraints and Disadvantages).

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Table : 2 ABCD Analysis

Area of Focus Advantages Benefits Constraints Disadvantages
Organisational ●Good returns ●Overall money ●very few ●No standard
Issues for small circulation in the decision makers vision and
investments. rural areas. ●no proper objectives
●Fund ●Fund flow hierarchy levels ●Improper
availability at within the small ●Differences in financial plans
lesser cost group of people opinions and lack and strategy
●Large group of of principles ●Bias in
investors financial
decisions
Operational ●Lesser the ●Implementation ●Economies of ●Lack of
issues employees, more of plans are easy. scale is difficult planning and
effective ●There will be sometime forecasting
decision making clear information ●Monopoly in ●Lack of
●High on each process each activity due coordination
Productivity due to all employees to geographical between each
to better ●Quick and easy criteria credit
understanding methods for cooperative
work societies
environment ●Improper
functional
departments
Technological ● Cooperative ●Easy access to ●These banks are ●Employees are
issues banks are almost customers lack in safety and in fear of loosing
computarised. queries security of their job due to
●Providing all ●Much quick customer data. technology
type of and right fund ●International implementation
technology based flow activities. fund transfer and
facilities to ●Service based payments are still ● Huge cost
customers customer not implemented involved in
improvements implementation
of technology

Employee and ●Cheap labor is ●Division of ●Lack of trained ●Employee

employer issues one of the work or activity employees union is strong
advantage. is easy ●Improper due to
●Work ●Good management geographical
satisfaction is relationship exist decision due to advantage
more in these between lack of ●Improper
cooperative bank management and experience management
employees employees. skills by top
management is
common here
Social and ●cooperative ●Better work ●Each state will ●Lack of ethics
Environmental banks create environment for have different in both
issues rural long duration of levels of employees and
employement stay. management customers day by
opportunities ●positive ●Repay of loans day.
●Good returns in contribution and advances are ●Government
macro level towards country in irregular trend. intervention is
business will economy ●Lot of much disturbing
make the uncertainty in part in
stakeholders business cooperative
happy management sector.
●Huge
competition by
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unethical local
money lenders.
Customers issue ● There exist ●Customers’ ●More number ●There is a less
good customer expectations are of branches are demand for these
service provided fulfilled by not available for type of
in rural areas. financial quick service. cooperative
●User friendly assistance ●Huge banks.
process and plans ●Rural expectations in ●No much
for their agriculture quality and easy attractive offers
customers development is service by and facilities
●Lost lasting possible customers from these banks
products and ●Lack of to retain
service for customer data customers and
customers base attract new
management and customers
query handling

External Analysis
External analysis mainly deals with the analysis of stakeholders of the cooperative banks. The major
stakeholders include not only the owners, but Investors, Government, Customers, Employees and
community.

Figure :Stakeholder model from Donaldson and Preston

These co-operative banks have benefited many people and people who have invested in the sector. Both the
input industry and the output industry users have benefited from this collaboration program. Co-operatives
are member organizations, voluntarily formed (or joined) by their members, aimed to meet the needs of their
members. Their members have a double relationship with the federation. Both owners and users, whether
buyers, producers, employees. Because of their co-operative identity they are driven by investors who are
‘involved in design’. They are the ‘top and most prominent stakeholders’ who have the power to make their
grievances sound and influence the way they will be cared for and this has been achieved through the
activities of co-operative banks in India. As these key stakeholders are satisfied, the co-operative sector is
very common in our country.
Even the governments both central and states have much confidence on the performance of cooperative
banks in the rural as well as Urban areas. The supports extended by the govt’s in functioning of these banks
have evolved major miles in their growth and prosperity.
The employees and customers are much satisfied in this sector by their deep knowledge and understanding
of the cooperative system. Any individual who borrows loans from the cooperative banks have benefited

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with low interest rates compare to commercial banks. The funding facility and regulations made by these
banks have increased the number of customers in thee banks who approach for loans and advances.
Basic idea in the sector is sharing the excess of resources with the known people for less profit and hence
this agenda has been achieved with the low cost loans and minimum profit margin in these banks. The
majority of the investors in these banks are the local people and agriculture based families. And the level of
satisfaction with these investors is reachable and flexible. Indian cooperative banks have been measured in
terms of growth and positive attitude with the enormous satisfaction of the investors.
PESTEL Analysis of The Indian Co-operative Banking system
PESTEL's analysis is about learning and understanding the political, economic, social, technological,
environmental and legal aspects that will directly or indirectly affect the level of small business in co-
operative societies.
In India we have seen a stable political system in the middle but we have an unstable political system in the
provinces. . Rural business finance institutions can develop strategies based on a stable political climate.
There are many government agencies and central government that reduce the risk of extreme stress with
proper support and guidance. But on the other hand it increases the time and cost of doing business as well
as obtaining certificates and approvals.

The tax evasion culture of the democratic government has greatly increased shortages and this could lead to
financial crisis in the coming financial years. We have all seen how the rise in U.S. spending has led to debt
overuse. Reducing the culture of nursing has led to people not having enough to save. Cfis Rural in India
should focus more on developing these areas where co-operatives fail. The inflation rate could impact and
create demand for Cfis Rural products in India. High inflation may require Cfis Rural to further raise prices
associated with inflation which could lead to lower levels of product reliability and ongoing cost
management efforts. Cost-Based Price can be a bad strategy under such circumstances. Currently in India
the high level of GDP growth reflects the growing economic demand at the same time, Cfis Rural can use
this movement to expand its product range / services and target new customers. One first step is to make a
map near the center - a buyer's approach and a growing price proposal.

Birth rate is one of the indicators of future need. Attitudes toward healthy living and safety are often
reflected in product quality and cost-effectiveness of production processes. Rural financial institutions have
strict health and safety rules so in developing countries, this world has to compete with players who do not
have the most expensive structures. Level of Public Concern & Public Awareness is much needed - High
levels of public concern often result in high consumer awakening and pressure from non-governmental
organizations, as well as oppressive groups.

Mobile Phones and Internet Access - Cooperative banks should assess the level of expertise regarding
internet users and mobile users in the country as they will in creating the required business model based on
local needs and realities. The transfer of technology and licensing issues in the country has made these
banks face many internal and external problems. such as shakedowns and IPR theft. Technology Integration
in Business and Procedures where we can take the example of Uber failed in China because it tried to get in
before the smartphone spread in China. Co-operative banks should develop a strategy that can integrate
public standards, infrastructure resources, and their available business model.
The environmental impact is broad in the area of cooperation. Most of the customers in these banks are from
rural areas and any impact on these areas will have a significant impact on debt collection and repayment.
Being a country like India the main participants in the co-operation sector come from rural and urban areas.
The climate of the villages has a profound effect on the corporate banking business.
Most control is in the RBI and most banks follow the guidelines of authorized banks. Financial and
operational support will be extended by the RBI to develop co-operative banks in India. Performance
standards and organizational decisions are approved and regulated by the central bank of India. The federal
banks comply with all types of legal requirements imposed by the national and local governments.
Major Players in cooperative sector in India.

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Saraswat Co-operative Bank :

Saraswat Co-operative Bank, established in 1918, is India's largest co-operative bank. It is headquartered in
Mumbai and operates in six states. In the financial year that ended on March 31, 2020, it made a gross profit
of Rs 651.69 crore. During the global COVID pandemic, the bank defied all constraints and experienced
growth across the board.
Saraswat Co-operative Bank provides exceptional customer service and has open policies, which have
enabled the bank establish itself as one of the country's largest cooperative banks. In 2019, it was named
"Best Technology Bank of the Year."

Cosmos Co-operative Bank

With clearance from the Reserve Bank of India, Cosmos Bank is the first of its kind to open a currency
chest. This bank's market capitalization and profits are among the best in the industry. These have aided
Cosmos Bank in cementing its status as one of the greatest cooperative banks and gaining clients' trust.

Shamrao Vithal Co-operative Bank (SVC Bank)

Shamrao Vithal Co-operative Bank was founded in 1906 in Mumbai and is regarded a pioneer in India's
cooperative banking industry. Shamrao Vithal Co-operative Bank, India's third-largest co-operative bank,
has changed its name to SVC Bank.

SVC Bank tries to serve as many people as possible and has a total business of over Rs.250 billion. The
bank has 193 branches spread across India's 10 states. SVC Bank received the "Best Urban Co-operative
Bank" award from the Brihan Mumbai Nagari Sahakari Banks Association in 2018.

Abhyudaya Co-operative Bank Ltd

The first bank on the list, Abhyudaya Co-operative Bank Ltd, began operations following India's
independence in 1964. With an initial investment of Rs 5000, it was founded by the economically
disadvantaged workers of Mumbai's Kalachowkie, Sewri, and Parel slums and now generates billions in
revenue.

In Maharashtra, Karnataka, and Gujarat, Abhyudaya Co-operative Bank has 111 branches, with 34 of them
offering evening banking services. In 2014-15, Abhyudaya Co-operative Bank earned the "Best IT Enabled
Co-operative Bank" award for keeping up with new technologies.

Bharat Co-operative Bank

The Bharat Co-operative Bank was established in 1978 and is based in Mumbai. The bank has a customer
base of around Rs 5.5 lakhs throughout Maharashtra, Karnataka, and Gujarat, despite its youth.

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Bharat Co-operative Bank has kept up with technology and now offers new technological solutions such as
mobile apps, card offers, and more. In 2017, it received the "Best Urban Co-operative Bank" award, and in
2016, it received the "Best Information Technology" award.

TJSB Co-operative Bank

In terms of the number of individuals it serves on a daily basis, Thane Janata Sahakari Bank is one of the
country's largest banks. It was founded in 1972 and now has 136 locations throughout five states.

The bank has been constantly adjusting to new technology in order to provide the best possible service to its
customers. It is the first co-operative bank to implement UPI, and it has several award-winning mobile
applications and payment systems to help consumers with transactions and banking.

Janata Co-operative Bank

In Malleshwaram, Bangaluru, the Janta Co-operative Bank was established. The bank is renowned as one of
the most transparent banks in the country, with new goals set to be achieved every year. It is affiliated with
some of the country's most prominent people. The bank has a reserve of Rs 1,336.61 crore, which would
provide stockholders with an 18 percent dividend for many years.

Many awards have been given to the bank, including "best green effort," "best ATM initiative," and "best
bank in the deposit category of more than Rs 5000 crores."

The Ahmedabad Mercantile Co-operative Bank

The Ahmedabad Mercantile Co-operative Bank Ltd., also known as AMCO BANK, was founded in 1966. It
has 34 locations and focuses on providing quick and accurate service.

As of March 2021, the bank has an authorised capital of Rs 20 crores and a profit of Rs 40.46 crores.

CSR Activities by Cooperative Banks

From the beginning, the founders and successors of this bank intuitively grasped the significance of
cooperative institutions in philanthropy. They were foresighted in recognising the importance of keeping a
cooperative institution connected to society's needs and ambitions. When the people of Mumbai faced a
severe shortage of food grains during WWII, Saraswat Bank took the risk of opening a ration shop in
Girgaum to alleviate their suffering and provide the fundamental essentials of life. Saraswat Bank was a
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community-oriented bank at the time, yet no one questioned his charitable gesture, despite the fact that the
Banking rules, Cooperative Laws, and Bye-laws did not allow it. Since then, these banks have provided
financial aid to a variety of social, educational, and medical institutions through grants from their funds each
year. It has served as a precursor in times of adversity such as floods, famines, earthquakes, and other
natural disasters. It has established scholarships and apprenticeships for eligible students, and it has aided in
the development of several young people's careers.

Cooperative banks are making a greater contribution to society through CSR efforts in a variety of sectors.
This includes delivering low-cost health-care kits to the underprivileged, low-cost fertilisers and seeds to
farmers, and much more.

However, co-operative banks face a difficulty in combining their cooperative specificities with external
CSR criteria in order to entrench their contribution to more sustainable economic and social development.
Self-help, responsibility, and solidarity are promoted by cooperative banks. They place a premium on the
well-being of society as a whole. They began as an innovative response to uneven access to financial
services, and the notion of mutualisation served as a means of emancipation. We promote education,
knowledge, and skills in accordance with the cooperative premise that "co-operatives provide education and
training for their members, elected representatives, managers, and employees so that they can effectively
contribute to the development of their co-operatives." These institutions educate the broader public,
particularly young people and opinion leaders, about the nature and benefits of these institutions.

Effect of Covid 19 on Cooperative banking sector in India

We have seen that the merger banks and the federal banking sector, especially the domestic co-operatives,
are trying to emerge from the 2022 epidemic. And yet, some of the major problems such as structural
barriers that hinder the accumulation of rules, as well as higher standards. of credit issues and the restoration
of trust by the treasury due to fraud at various banks continues to emphasize this area of cooperation. By
2022, the Reserve Bank, the Government of India and other provincial governments are working on these
issues and addressing the issues as a priority. The Banking Regulation (Amendment) Act, designed to
support this type of co-operative banks in India enacted in 2020 gave the State Bank of India additional
powers to regulate and re-establish the urban and rural co-operative sector. The development of another
deposit insurance by co-operative funders from 42.7 percent at the end of March 2021 to 69.4 percent at the
end of March 2022. Establishment of a separate department for the Indian government under the name
Ministry. Co-operation in July 2021 focused on providing a separate administrative, legal and policy
framework that allows for the development of multi-provincial co-operatives. The strengths and successes
of UCBs are likely to increase during the post-Covid closure, due to their 'concentration risks'. The level of

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vulnerability can be estimated by the fact that by the end of March 2020, 357 UCBs have been completed /
reassembled / rebuilt covering a total of 4,903 cr as part of DICGC's claim compensation process.

By 2020, the RBI had issued strict directives to 4 large UCBs, extended the guidelines to 28 cooperatives
and at the same time canceled three licenses and imposed fines on about 17 coops. Without all of these
reasons the weak CBB inflation may not be able to stop them from emerging shocks.

A recent review by the current government that provides central banks with regulatory and regulatory
provisions that may encourage UCBs to operate more efficiently, will not only make these banks ready for
the future, but also reduce the frequency of causal banks. crores of depositors deposits. The central bank of
the country has also been able to control UCBs more directly and effectively as 'dual' control has been
reduced. As a result, most of the red tape and official jargon will be removed.

Chart 1 : Structure of Cooperative Banks

StCBs and DCCBs are having more than 78 percentage of their branches in rural/semi-urban areas. And the
agricultural loans account for approximately 42% and 51% of their outstanding loan portfolios, respectively.
In comparison to SCBs, StCBs and DCCBs were able to manage the pandemic in more favourable
geographies and industries. As SCBs made inroads into this market, co-operative banks in states and rural
india proportion of ground level credit to agriculture has been steadily shrinking. However, in 2021 and mid
of 2022, the former's proportion grew due to a large increase in new loans given. In 2020-21, 94 percent of
StCBs and 88 percent of DCCBs14 recorded profits, compared to 97 percent and 83 percent in 2019-20.

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Analysis of Cooperative Sector in India : Predictive Analysis

The Banking Regulation (Amendment) Law of 2020 authorized the State Bank to make regulations in this
area. The increase in deposit insurance from '1 lakh to '5 lakh' increased institutional investor coverage from
42.7 percent at the end of March 2019 to 69.4 percent at the end of March 2021. The Cooperative
Department was established in July. 2021 to provide a separate regulatory, legal and growth framework for
multi-provincial cooperatives.

As sub categories we have

1. UCB: Urban cooperative banks
2. Rural Co-operatives
1.1 Growth of UCB

The urban cooperative banking sector felt the effects of

financial liberalization in the 1990s. A more open licensing
policy has lowered barriers to entry, while interest rate
deregulation has attracted new players with higher operational
margins. The number of UCBs increased from 1,307 in 1991
to 2,105 in 2004, and deposits increased at a CAGR of 18%.
However, financial weakness in many organizations in the
following years raised concerns about their systemic impact.
The Reserve Bank initiated a consolidation effort in the
industry, which included merging unprofitable UCBs with
viable equivalents, closing non-performing institutes.

Chart 2 : Growth of UCB in Numbers New licenses will not be issued to viable entities, and new
licences will be suspended. As a result, the number of UCBs has increased. Number of UCBs (Graph V.3)
RBI's off-site surveillance returns are the source of this information. Consolidation Drive in UCBs (Graph
V.4) a. UCB Mergers' Geographical Distribution (Cumulative as at end-March 2021) b. Licensing
Termination By the end of March 2021, the RBI had dropped to 1,534.1.2 Consolidation Drive in UCB’s
Since 2004-05, the consolidation effort has resulted in 136 mergers, with more than three-quarters of them
occurring in two states: Maharashtra and Gujarat (Chart V.4a). The merger process was accompanied by
licence cancellations, with 44 UCB licences being cancelled between 2015 and 2016. The number of
scheduled UCBs (SUCBs) has stayed relatively steady, despite the majority of mergers and closures occurring in
the non-scheduled category.

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Chart 3 : Consolidation drive in UCB

1.2 Asset Growth in UCB’s
For nearly a decade, the consolidation push, which began in 2004-05, has shown positive results, with the
combined balance sheet of UCBs growing at a CAGR of 14%. However, from 2017 to 2018, the economy
has been in a low-growth phase that will last until 2020-21. SUCBs were the leaders in driving the sector's
growth from 2013-14 to 2015-16; however, non-scheduled UCBs (NSUCBs) have gained traction since
then. Over the last four years, the sector has grown at a slower rate than SCBs.
Chart 4 : Growth in Assest of UCB’s

At the end of March 2021, UCBs had invested 89 percent of their total assets in SLR instruments, with
more than half of it in central government securities (Chart V.11b). Low credit demand and a need for
returns have stimulated investment in state government securities in recent years. As a result, the share of
central government securities held by UCBs has decreased from 73% at the end of March 2016 to 57% at
the end of March 2021.

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Chart 5 : Investment Proportionate by UCB

2. Rural Cooperatives
Rural co-operatives, which accounted for roughly 67 percent of all co-operative assets at the end of March
2020, differ from their urban counterparts in terms of their operations, reach, performance, and liability
makeup. While UCBs may raise funds at a low cost because to their large depositor base, rural co-operatives
are largely reliant on borrowings for their operations — borrowings accounted for roughly 1% of UCB
liabilities at the end of March 2020, but as high as 27% for rural co-operatives.
Short-term institutions, such as State Co-operative Banks (StCBs), District Central Co-operative Banks
(DCCBs), and Primary Agricultural Credit Societies (PACS), were created among rural co-operatives to
offer farmers and rural artisans with short-term crop loans and working capital loans. Long-term co-
operatives, on the other hand, such as SCARDBs and PCARDBs, have a mandate to offer capital for
agricultural investment, such as land development, farm mechanisation, and minor irrigation, rural
industries, and housing. Long-term credit co-operatives' percentage of total assets has been declining for
more than a decade, and is expected to reach slightly over 5% by end-March 2020, primarily in line with the
declining share of agriculture investment in total investments. Concurrently, their financial performance has
deteriorated: by the end of March 2020, their share of total NPAs and rural cooperative net losses was
higher than their share of total assets.

Chart 6 : Financial Performance.

2.1 Short-term Rural Co-operatives
Short-term rural co-operatives, which were originally created to provide short-term crop loans, have
expanded their activities to include non-farm lending, term lending to allied sectors, and personal and
housing loans, among other things. A three-tier structure is currently in place in 20 states, with StCBs at the
state level, DCCBs at the district level, and PACS at the village level. Jharkhand and Kerala12 each have a

single DCCB, while the remainder were merged with their respective StCBs. They are arranged in a two-tier
structure in 9 states and 5 union territories, with only StCBs and PACS.

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Chart 7: Comparisons of Rural cooperatives:

2.2 Credit Deposit ratio at Rural Cooperatives.

DCCBs are the intermediate tier in the short-term rural co-operative system, mobilising capital through
public deposits, borrowing from StCBs, and refinancing through NABARD. Individual borrowers and
PACS are both lent to by DCCBs. In fact, however, they are less reliant on borrowings than StCBs because
they may collect deposits through their wide branch network. This corresponds to lower C-D ratios than
StCBs, despite DCCBs' bigger outstanding credit.
Chart 8 : Credit Deposit ratio

Conclusion :
Early indications imply that cooperative banks fared well throughout the pandemic's first wave. It is
believed that structural improvements that address deep-seated fault lines will catalyse change in their
operations. To combat competitive pressures from other specialty banking categories, such as SFBs, UCBs
are increasingly turning to technology. Regulations and enforcement measures are being used to address
issues of poor governance. With an upswing in economic activity, the sector is projected to build on its
resilience and use recent financial developments to expand its footprint in order to access finance at the
grass-roots level in the future.

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Furthermore, there is an urgent need to assess whether having a genre of banks that creates confusion and
doubt in the minds of customers is desirable or not.

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3.Indira R(2019). A Study on Cooperative Sector Banks in India: Problems & Prospects. Journal of Advances and Scholarly
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8. SAHAKARA SINDHU : https://sahakara.kar.gov.in/Listofsocieties.html Accessed on 6/1/2022

9. LIVEMINT WEB CHANNEL : https://www.livemint.com/industry/banking/cooperative-banks-to-build-on-resilience-

leverage-financial-position-to-expand-footprint-rbi-11640707246603.html Accessed on 6/1/2022

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