Vol-4 Issue-1 2018 IJARIIE-ISSN(O)-2395-4396

A STUDY ON EVOLUTION OF
COOPERATIVE
BANKS IN THANJAVOUR DISTRICT
V.Padmavathi, Plot No.34,F2, Kumaran Nagar,T.V.K. Street
Gerugambkam, Chennai- 122, E.Mail.
[email protected]

Dr.S.Rajkumar, Assistant Professor of Commerce, M.R.Government Arts College,

Mannargudi, Thiruvarur District 614001 [email protected]

Abstract

It is a well known fact that for any nation, banking system plays a vital role in the development of its
sound economy. India is not an exception. Bankers are the identified custodians of the liquid capital of the
country mobilized in the form of savings. Bankers are trustees of the surplus balances of the subjects of the
country. The onerous duty of the banks lies in stimulating and mobilizing the economic surplus of the country.
A well knit banking system secures a good foundation for a nation‟s agricultural and industrial growth. The
intermediary role played by the bankers in mobilizing the savings and utilizing them for the developmental
activities ensures an uninterrupted integrated economic progress. India‟s economic progress is twined with the
progress of its vast rural and semi-urban areas, as it is rightly felt and pronounced by illuminated leaders that
India lives in its villages. This article makes an attempt to study about evolution of co -operative banks in
Thanjavour district in Tamilnadu.

1.1 Introduction
Banks, naturally, occupy a prominent place in the Nation‟s eg alitarian vision because of their
unparalleled outreach and resources in terms of network, manpower, expertise and experience. The banking
sector‟s crucial role at times of major shifts in economic policy has been amply demonstrated in the past.
Centuries of the banking evolution in India and elsewhere have seen umpteen falls and rise. Throughout its
evolution, banking has proved to be an indispensable part of the Nation‟s economy. It is evident from the
history of banking in India that banking has grown along with the growth of civilization, culture and economy of
the Nation. Banking throughout its history has been dynamic and gradually developed adapting to the changes
of the time. Although, in recent years, the history of banking has begun to receiv e attention, thanks to research
workers in this field, it is not necessary, for our purposes, to give any detailed description of the banking system,
which served this country before the advent of modern economy. However, banking in those days must have
meant largely money lending, financing kings and their wars, though certain rudiments of modern banking
functions were not unknown to the then bankers (Tannan, 1991, 9). Thus in olden days, certain identified section
of people of the society was doing the banking as their hereditary business. They were providing credit for
productive and trading activities against tangible securities. Though, the indigenous bankers were helping the
capital formation in the Indian economy, many of them were ruthless and us urious. Usury and profiteering
constantly affected the poor sections of the society that covers a large percentage of Indian population. As an
alternative to usury and to help mutually among themselves, people voluntarily came together to form
cooperative institutions. Thus co-operation as a form of business organization owes its origin to poverty and
economic distress.
The cooperative system world over had emerged with a distinct objective, namely, to safeguard the
interest of its members and provide financial assistance to those who were unable to get financial help from
other institutions (Shamim Kazim, 2001, 9). The cooperative organizations began with consumer cooperatives
and cooperative credit societies. The movement later on spread to other fields of economic activities including
banking.

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After independence, India adopted a socialistic pattern of society as its goal. This means, in non -
technical language, a society with wealth distributed as equitably as possible without making the country a
totalitarian state. The goal is purported to be achieved through democratic processes. With this aim in view, a
mixed pattern of planning is evolved (Tannan, 1991, 119).

In a mixed economy, the public and private sectors have been allowed to functio n independently of
each other while the cooperative sector has been identified as a peoples‟ movement. The public sector is wholly
owned and controlled by the government. The private sector is regulated through a system of regulations,
licenses, controls and legislative acts. The cooperative sector has also been regulated through Reserve Bank of
India and respective state government, even though it has emerged as a democratic „Native Sector‟ of the
people, by the people and for the people. The political and financial integration of the independent India has
favoured planned growth in agriculture, industries and infrastructure. The economic activities have become
vibrant and duly streamlined through a regulated banking system under all the three sectors viz., Public, Private
and Cooperative sectors. The banks under public and private sector are generally termed as commercial banks
as they are profit motive whereas cooperative banks are service oriented and function under cooperative
principles.

2.2 Indian Banking Scenario

It is a well known fact that for any nation, banking system plays a vital role in the development of its
sound economy. India is not an exception. Bankers are the identified custodians of the liquid capital of the
country mobilized in the form of savings. Bankers are trustees of the surplus balances of the subjects of the
country. The onerous duty of the banks lies in stimulating and mobilizing the economic surplus of the country.
A well knit banking system secures a good foundation for a nation‟s agricultural and industrial growth. The
intermediary role played by the bankers in mobilizing the savings and utilizing them for the developmental
activities ensures an uninterrupted integrated economic progress. India‟s economic progress is twined with the
progress of its vast rural and semi-urban areas, as it is rightly felt and pronounced by illuminated leaders that
India lives in its villages.

Cooperative banks play their vital role in promoting development and growth, especially in the context
of planning and breaking the vicious cycle of poverty in rural and semi-urban areas. In India, Cooperative
banks have played big role in Indian economy. Cooperatives made easy to fund the poor farmers and other rural
areas that is three fourth in India (Archit B. Panchal, 2005). Thus the role played by the cooperative banks in
building a strong nation is further appreciated by the quote from the writings of Pandit Jawaharlal Nehru, the
architect of independent India, that, “There are three essent ials for an Indian village viz., a Cooperative, a
Panchayat and a School; the Panchayat to deal with the political affairs of the village, the cooperative in
economic affairs and the school in educations, with these things, we can build our country in a st rong
foundation”.

2.2.1 Pre-Reform Period Developments

The Indian Banking System as a whole including cooperative banks have undergone many changes to
suit the various phases of growth in the economy and growth of population.
Various milestones in the path of progress of a consolidated banking industry in India are:
 Emergence of India‟s Central Bank, The Reserve Bank of India in 1935 as a result of the
recommendation of Royal Commission on Indian Currency and Finance.
 Promulgation of Banking Regulation act, 1949 to consolidate and amend the laws relating to banking
companies. (Banking Companies Act 1949 was renamed as Banking Regulation act w.e.f. 01.03.1966)
 The constitution of State Bank of India in 1955, converting the Imperial Bank of India which was
formed earlier through an amalgamation of the three Presidency Banks (Bombay, Calcutta and
Madras).
 Formation of State Bank‟s subsidiary Banks representing seven princely states in India in 1959 through
State Bank of India (Subsidiary Banks) act of 1959.
 Amendments of the Banking laws (as applicable to Cooperative societies) Act in 1965.
 Establishment of Industrial Development Bank of India in 1964 as per IDBI Act 1964.
 Nationalization of major commercial Banks in 1969 and 1980 under the Banking Companies
(acquisition and transfer of undertaking) Act 1970 and 1980.
 Formation of National Bank for Agricultural and Rural Development (NABARD) in 1982 under the
NABARD Act 1981.
 Setting up of Export-Import Bank of India (EXIM Bank) in 1982 as per EXIM Bank Act 1981.
 Establishment of Regional Rural Banks in 1987 under the provisions of Regional Rural Banks Act
1976 and as amended in 1987.

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 Opening of National Housing Bank in 1987 as per National Housing Bank Act 1987.
The various phases of growth in Indian Banking have consolidated Indian Banking under Public sector,
Private sector and Cooperative sector. A few foreign banks have been allowed to open their branches in India to
facilitate international business and currency transactions.

Fig. 2.1 Consolidated Indian Banking System

Reserve Bank of India

(Central Bank and Monetary Authority)
Commercial Banks Regional Rural Banks
Cooperative Banks

Public Sector Private Sector State Cooperative Bank

Indian Foreign Central Cooperative Banks

State Bank group Other Nationalized Banks

Primary Credit Societies/ Urban
Cooperative Banks
State Bank of India Associate Banks

Source: Sundaram K.P.M and Varshney S.P.N., 2004, “Banking Theory, Law and Practice”, Sultan
Chand & Sons, New Delhi, 1.

2.2.2 Post-Reform Period Developments

In 1991, the Government of India has set up a committee under the Chairmanship of Mr. Narasimham to make
an assessment of the banking sector. The report of this committee contained recommendations that formed the
basis of the reforms initiated in 1991. The banking sector reforms had the following objectives:
 Improving the macro-economic policy framework within which banks operate.
 Introducing prudential norms.
 Improving the financial health and competitive position of banks.
 Building the financial infrastructure relating to supervision, audit technology and legal framework,
and
 Improving the level of managerial competence and quality of human resources (ICRA Ltd., 2002).
Thus the financial sector reforms, which include banking sector reforms, set in motion in 1991 have
greatly changed the face of Indian Banking. The banking industry has moved gradually from a regulated
environment to a deregulated market economy. The market developments kindled by liberalization and
globalization have resulted in changes in the intermediation role of banks. The pace of transformation has been
more significant in recent times with technology acting as a catalyst. While the banking system has done fairly
well in adjusting to the new market dynamics, greater challenges lie ahead. Banks have to cope with the
challenges posed by technological innovations. Banks need to prepare for the changes and cope up with the
challenges. The important developments are:

1991
 First Narasimham committee report on Financial Sector reforms.

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1992
 Introduction of Risk Weighted Capital adequacy norms and prudential norms.

 The SHG-bank linkage project was launched by NABARD as a pilot project.

1993
 Deregulation of interest rates, prudential norms for maximu m Non Performing Assets.

 Debt Recovery Tribunal (DRT) was set up under the Recovery of Debts due to Banks and Financial
Institutions Act 1993.

1994
 Introduction of Banking Ombudsman Scheme.

 An independent Board for Financial Supervision (BFS) under the RBI was constituted in Nov. 1994.

1995
 Concept of Local Area Banks (LAB) introduced.

 A broad framework for negotiated settlements for old and unresolved NPAs was put in place by
RBI/Govt. of India in July 1995.

1996
 First shared payment network system and conditional autonomy to Public Sector Banks was initiated.

1997
 Second Narasimham Committee report on Banking Sector reforms.

1998
 Guidelines on Risk Management were issued by RBI.

1999
 Insurance Regulatory and Development Authority (IRDA) Act 1999.
 Specific guidelines were issued by RBI in May 1999 to Public Sector Banks for One-Time Settlements
(OTS) of NPAs of Small Scale Industries.
2000
 Provisioning requirements of minimum 0.25% were introduced for standard assets in 1 st April, 2000.
 The minimum Capital Adequacy Ratio (CAR) was raised to 9% (from 8%) on the recommendation of
the committee on Banking Sector Reforms w.e.f. 31st March 2000.
 Indian Parliament enacted a comprehensive Information Technology Bill which received the
President‟s ascent on 9th June 2000. (I.T. Act 2000)
2001
 RBI tightened the NPA norms by removing the „past due‟ concept. As such NPAs well recognized 30
days earlier.
 Govt. of India introduced the competition Bill 2001 to do away with the Monopolies and Restrictive
Trade Practices (MRTP) Act 1969.
 RBI issued detailed guidelines on 23rd August 2001 for implementation of Corporate Debt
Restructuring (CDR) scheme by Financial Institutions and Banks.

2002
 Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002
(SARFAESI Act. 2002)
2003
 RBI advised banks to adopt integrated risk management systems on 29 th January 2003.
 Pension Fund Regulatory and Development Authority (PFRDA) was established.
2004
 The period of classification for NPA was shortened from 180 days to 90 d ays from the year ending 31st
March 2004.
 Govt. appointed a committee under the chairmanship of Prof. A. Vaidyanathan for the revival of ailing
cooperative sector.

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 RTGS – Real Time Gross Settlement was established by RBI for quick transfer of funds.
2005
 IRDA issued guidelines on 14th July 2005 for insurers appointing corporate agents.
 RBI formulated a draft vision document and placed it in the public domain in March 2005 to regulate
governance of Urban Cooperative Banks.
 RBI constituted State Level Task Force for Cooperative Urban Banks (TAFCUB).
2006

 The Micro Small and Medium Enterprises Development (MSMED) Act 2006 was passed and came
into force from 2nd October 2006.

 RBI appointed a Technical working group headed by S.C. Gupta, the then legal a dvisor to RBI in May
2006 to study on the role of money lenders in the rural credit delivery system.
2007

 RBI announced in October 2007 that RRBs and State/Central cooperative banks to disclose their
Capital to Risk weighted Assets Ratio (CRAR) as on 31st March 2008 in their balance sheets.
2008
 On 6th August 2008, the RBI and SEBI issued operational guidelines for trading in currency derivative
markets.

2.3 Cooperative Banks in India

While commercial banks cater to the requirements of the highly organized industries and commercial
undertakings and organizations, the cooperative banks in India, as elsewhere, provide banking facilities to the
highly disorganized agricultural sector of the country‟s economy (Hajela, 1994).

The cooperative banks are institutions established with the principles of co-operation. The objective of
such organization is to facilitate rural credit and to promote thrift and self help among the economically weaker
sections of the society. Cooperative banks in India have come a lon g way since the enactment of the
Agricultural Credit Cooperative Societies Act, 1904. The century old cooperative banking structure is viewed
as an important institution of banking, having an access to the rural masses and those who are engaged in
unorganized productive activities. Thus this cooperative banking serves as a vehicle for democratization of the
Indian financial system.

The cooperative banking structure in India comprises Urban Cooperative Banks and Rural Cooperative
Credit Institutions. Urban Cooperative Banks consists of a single tier viz., primary cooperative banks,
commonly referred to as Urban Cooperative Banks (UCBs). The rural cooperative structure has traditionally
been bifurcated into two parallel wings viz., short term credit inst itution and long term credit institution. Short
term cooperative credit institutions have a federal three tier structure consisting of a large number of Primary
Agricultural Credit Societies (PACS) at the grass root level (now called as Primary Agricultural Cooperative
Banks), Central Cooperative Banks (CCBs) at the district level and State Cooperative Banks (SCBs) at the state
level. The long term cooperative credit structure has two tiers, viz., State Cooperative Agriculture and Rural
Development Banks (SCARDBs) at the State level and Primary Cooperative Agricultural and Rural
Development Banks (PCARDBs) at the taluk level.

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Fig. 2.2 Structure of Cooperati ve Credit Institutions

Cooperative Credit Institutions

Urban Cooperative Banks (1872) Rural Cooperative Credit

Institutions (106919)

Short term structure (106131) Long term structure (788)

State Cooperative Central Cooperative Primary

Banks (31) Banks (365) Agricultural Credit
Societies (105735)

State Cooperative Primary Cooperative

Agriculture and Rural Agriculture and Rural
Development Banks (20) Development Banks (768)
Note: Figures in parenthesis indicate the number of institutions at the end march 2005 for Urban Cooperative
Banks and at end march 2004 for Rural Cooperative Credit Institution.

Source: Reserve Bank of India, 2005, Report on Trend and Progress of banking in India, 2004 -05. Chap. IV –
Developments in cooperative banking, 108.

2.3 Urban Cooperative Banks

The Urban Cooperative Banks have been working as a separate entity in the Indian financial system
and have been performing their role in urban and semi-urban areas. “The functions of UCBs in India are
governed by the Banking Regulation Act, 1949. The Banking Regulation Act was not applicable to UCBs till
March 1966. It was made applicable to them with the ultimate object of protecting customers‟ interest as large
amounts of deposits were at s take (Shamim Kazim, 2001, 12). Sec. 6 of Banking Regulation Act, 1949 permits
UCBs to undertake certain special functions which are uncommon to other cooperative banks in India. UCBs
mobilize savings from the middle and low income groups and provide credit to small borrowers, including
weaker sections of the society.

2.4.1Objectives
The principal objects of the Urban Cooperative Banks are:
 To mobilize resources by way of deposits from members and non -members.
 To grant loans to members for various productive and consumption purposes.
 To offer various banking services such as collection of bills, cheques, drafts etc. accepted from the
members
 To keep the valuables of the members under safe custody and
 To offer all other banking facilities normally provided by commercial banks.

The most significant development relating to urban cooperative banks has been the extension to
cooperative banks of certain provisions of the Banking Regulation Act 1949, from 1st March 1966.

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Accordingly, every urban cooperative bank existing as on 1st March 1966 or a new urban cooperative
bank organized thereafter was required to apply to the Reserve Bank for a license to carry on or commence
banking business. The statutory power of inspection of UCBs was also vested in the Reserve Bank, which could
exercise it either directly or through the concerned state cooperative bank. Powers in regard to incorporation,
management and winding up continued to be governed by the State Cooperative Societies Act concerned.

2.4.2 RBI Control and Inspection

The Urban Cooperative Banks are governed by the following enactments:
 The State Cooperative Societies Act and Rules,
 The Banking Regulation Act (as applicable to cooperative banks),
 The by-laws of the banks,
 Directives issued by the RBI from time to time
 Multi unit cooperative societies Act is applicable where the bank is having its branches in more than
one state.
 The RBI exercises the monetary discipline over the urban banks in the following manner:
 Statutory liquidity under section 18 and 24 of the Banking Regulation Act.
 Annual Inspections of the banks under sections 35 and
 Issue of directives.

2.4.3 Reforms in UCBs
The UCBs being an integral part of financial system, RBI has brought in a series of reforms in it. RBI
has accepted the recommendations of the HPC on UCBs (1999) and implemented them. The HPC has focused
on the vital issues of UCBs viz., licensing policy, failure of weak banks and dealing with their rehabilitation,
application of capital adequacy norms, resolution of con flicts arising out of dual control over UCBs etc. Among
the issues, much progress has not been made on dual control which necessitates legislative changes in state and
central acts. However, the other issues have been addressed by RBI and in a phased man ner the prudential
norms have been implemented. RBI has taken measures to identify weak banks. The process has been taken up
very cautiously so as to avoid panic in the society. Level of capital, history of losses and size of NPAs are some
of the factors which weigh in taking the decision on closure. Further, closure of unviable branches, getting
additional capital, speedy recovery of NPAs, possibility of merger with well managed bank, possibility of
rehabilitation with the help of the state government, etc., are the various options explored before the decision of
closure of weak banks is taken. .

The RBI has announced the above prudential norms for the purpose of streamlining the functions of the
urban cooperative banks and making them competitive in the liberalized environment. Failure of cooperative
banks will dilute the confidence of people towards co -operation. Therefore, the regulations and guidelines
should be framed in such a way to avoid any mismanagement or irregularities in day -to-day functioning of
urban cooperative banks. The RBI has taken right steps to strengthen the financial discipline in cooperative
banks by implementing the reforms.

2.5 NATIONAL LEVEL PERFORMANCE INDICATORS OF UCBs

Table 2.1 LIABILITIES AND ASSETS OF URBAN COOPERATIVE BANKS
as at the end of March 2010
(Rs. in Crores)
Liabilities
1. Capital 3884
2. Reserves 10867
3. Deposits 120983
4. Borrowings 2602
5. Other Liabilities 21515
Total Liabilities 159851
Assets

1. Cash in Hand 1639

2. Balances with Banks 9806

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3. Money at Call and Short Notice 1859

4. Investments 47316

5. Loans and Advances 78660

6. Other Assets 20571

Total Assets 159851

Source: All India Cooperative Bank Employees’ Federation, 2012, Glimpses on Urban Cooperative Banks 5 th
Conference, 17-19 Feb. 2012, Ahmedabad, 9.
The business operations of the Urban Cooperative Banks have increased at a lower rate of 5.9% during
2009-10 while the growth in commercial Banks is at 24.8% during the same period. The composition of the
Assets and Liabilities has not undergone big changes in the year 2010 in comparison with the position in the
year 2008. Deposits accounted for 75.7% of the total resources of Urban Cooperative Banks. There has been an
increase in terms of percentage in respect to borrowings. Even though the comparison with previous years, the
financial performance of the UCBs is on the increase, it hardly provides a big sense of satisfaction (All India
Cooperative Bank Employees‟ Federation, 2012).

2.5.1 National level performance of UCBs on Deposits Mobilization

Deposits which form part of the borrowed funds are the main source of funds for the urban banks.
Unlike other cooperative institutions urban banks depend very little on other agencies for their resources. This
is due to the fact that they are able to attract adequate deposits that being one of the main objectives of urban
banks. Urban banks accept fixed deposits, current deposits, recurring deposits, saving, thrift deposits, etc., In
addition to these in states like Tamil Nadu they had introduced, day deposit schemes . One of the reasons for
their able way of attracting deposits is that urban banks are allowed to pay one percent more than other banks
for their deposits. Though they are not able to provide all modern banking facilities like commercial banks they
inculcate banking habits among ordinary people.
Table 2.2 DISTRIBUTION OF THE URBAN COOPERATIVE BANKS BY DEPOSIT-SIZE (end of
March 2010)

Deposits No. of Urban Amount (Rs. in Share in the total

Sl.No.
(Rs. in Crores) Banks Crores) deposits (%)

1 Over 1000 15 32748 27.1

2 500-1000 17 11897 9.8

3 250-500 45 16152 13.4

4 100-250 143 22042 18.1

5 50-100 206 14948 12.4

6 25-50 315 11283 9.3

7 10-25 446 8198 6.8

8 Less than 10 626 3715 3.1

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Total 1813 120983 100.0

Source: All India Cooperative Bank Employees’ Federation, 2012, Glimpses on

Urban Cooperative Banks 5 th Conference 17-19 Feb. 2012 Ahmedabad, 18.

2.5.2 National level performance of UCBs on Borrowings

Borrowings of urban cooperative banks from other financing agencies are almost negligible as
compared to those of agricultural credit societies. The urban banks generally borrow from central cooperative
banks, while a few borrow from the apex banks. Urban banks, as primary units, are members of the CCBs.
They are expected to borrow from the CCBs if they are not able to meet their demands out of their own
resources. But their borrowings from CCBs are very negligible. The CCBs are also reluctant to give loans to
the urban banks, because they are heavily committed to the PACBs.

2.5.3 National le vel performance of UCBs in Priority Sector Lending

Table 2.3 PERFORMANCE IN PRIORITY SECTOR LENDING

(end of March 2010)
(Rs. in Crores)
Priority Sector Weaker Sections
Segment Amount Share in Total Amount Share in Total
advances (%) advances (%)
Agriculture and Allied
2190 2.8 1010 1.3
Activities
Cottage and Small Scale
12125 15.4 1397 1.8
Industries
Road and Water Transport
2147 2.7 497 0.6
Operators
Private Retail Trade (Essential
2034 2.6 761 1.0
Commodities)
Retail Trade (Others) 4699 6.0 1069 1.3
Small Business Enterprises 6079 7.7 1698 2.2
Professional and Self
2685 3.4 927 1.2
Employed
Educational Loans 628 0.8 232 0.3
Housing Loans 10247 13.0 3092 3.9
Consumption Loans 1169 1.5 709 0.9
Software Industries 55 0.1 7 0.0
Total 44058 56.0 11399 14.5
Source: All India Cooperative Bank Employees’ Federation, 2012, Glimpses on Urban Cooperative Banks 5 th
Conference 17-19 Feb. 2012 Ahmedabad, 20-21.
2.5.4 National level performance of UCBs in Investments
The urban cooperative banks generally invest their surplus-money in government and other trustee
securities. Also they keep deposits with cooperative and other financing agencies.
Table 2.4 INVESTMENTS BY URBAN COOPERATIVE BANKS
(end of March 2010)
(Rs. in Crores)
Item Amount Percentage

Total Investments 47316 100

SLR Investments 44060 93.1

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Central Government Securities 28153 59.5

State Government Securities 3534 7.5

Other approved securities 830 1.7

Term deposits with StCBs 4932 10.4

Term deposits with DCCBs 6601 14.0

Non-SLR Investments 3256 6.9

Source: All India Cooperative Bank Employees’ Federation, 2012, Glimpses on Urban Cooperative Banks 5 th
Conference 17-19 Feb. 2012 Ahmedabad, 21-22.

2.5.5 Financial Performance of UCBs

 Urban Cooperative Banks comprise a number of institut ions with varied nature of business.
Primary Urban Cooperative Banks account for 4.4% of the deposits and 3.9% of the Advances of
the banking system.
 Urban Cooperative Banks have 50 million depositors and 7.1 million borrowers.
 There is a rise in the deposits during 2010-2011. There is an increase of 6.1% increase in deposits
over 2008-09 (All India Cooperative Bank Employees‟ Federation, 2012)
Various entities in the Urban Cooperative Banking sector display a high degree of heterogeneity in
terms of deposits and assets base, area of operation and nature of business. In view of its importance, it is
imperative that the sector emerges as a sound and healthy net work of jointly owned, democratically controlled
and professionally managed institutions. UCBs have grown rapidly since the early 1990s. During the phase of
rapid expansion, however, the sector showed certain weaknesses arising out of lack of sound cooperative
governance, unethical lending, comparatively high level of loan defaults, and inability t o operate in a liberalized
and competitive environment. The Reserve Bank, therefore, regulated the UCBs with appropriate application of
prudential norms and supervision to safeguard the interests of depositors. The Reserve Bank initiated several
regulatory measures during 2004-05 to ensure the growth of UCBs along sound lines (Reserve Bank of India,
2005, 109-110).

2.6 PROFILE OF SELECTED UCBs

2.6.1 Nicholson Cooperative Town Bank Ltd.
The Nicholson Cooperative Credit Society, Thanjavur was registered o n February 09, 1905 under
section 6 (2) of Indian Cooperative Credit Societies Act 1904 and started its function in a single room of the
Clock Tower, Thanjavur on February15, 1905 with registration No.8.

The society was named after venerable father of Cooperation, Sir Fredrick Nicholson who made a
detailed study of the methods of Cooperation in foreign countries and recommended its introduction in India.
The founder President of the society is Rao Bhahadur Swaminatha Vijaya Thevar, Zamindar of Papanadu who
adorned the Chairmanship for 20 years continuously. The subsequent Presidents as well as directors devoted to
the growth of the society. They are responsible for its present day position as Nicholson Cooperative Town
Bank Ltd. Growing along with the Cooperative Movement, the Nicholson Cooperative Town Bank Ltd., has
completed 100 years of yeomen service to the public of Thanjavur Town.

Started with a membership of about 180, paid up share capital of Rs. 6,375, deposit of Rs. 1,350 and
loan outstanding Rs. 7,000, the bank has made remarkable progress. As on October 31, 2004 the membership
has grown to 26305, the paid up share capital swelled to Rs. 71.55 lakhs, the total deposits increased to Rs.
2,994.87 lakhs and the loan outstanding arose to Rs. 1,637.89 lakhs.

The bank has been working within the preview of the Banking Regulation Act, 1949 (as applicable to
Cooperative Societies) and necessary license has been issued by Reserve Bank of India for continuing banking
business. Further, the bank has been registered as an “insured bank” in term of section 13-A of the Deposit
Insurance and Credit Guarantee Corporation (DICGC) Act 1961.

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At present the bank is managed by Special Officer appointed by the State Government. The bank
transacts all kinds of banking business in its own building situated in the business part of the town. The bank has
opened its branch at Yagappa Nagar, Thanjavur on December 12, 1997 with the permission of the Reserve Bank
of India.

2.6.2 Karanthattangudi Dravidian Cooperative Urban Bank Ltd.

The Karanthattangudi Dravidian Cooperative Urban Bank Ltd., No. E.197/3523 is registered as a
Cooperative Society under the Cooperative Societies Act of 1912 - Act II of 1912. Its address shall be:
No.1658, Gandhiji Road, Karanthattangudi, Karanthattangudi Post, Thanjavur Taluk in the Thanjavur District.
It was classified under Non-agricultural credit society and was registered on March 15, 1919. It started its
business on April 14, 1919 with only 25 members and Rs. 310 as the paid -up share capital. Thiru Appasamy
Vandaiyar, a landlord, took the initiative to start the KDCUB Ltd., in 1919. He was the first president of the
bank and the first secretary of the bank was Thiru Umamaheswaranar pillai. Loans are granted to members on
the security of immovable property situated in the registration sub districts of Thanjavur and Karanthattangudi.

The Objects of the bank shall be:

 To borrow funds from members or others to be utilized for loans to members for useful purposes.
 Generally to encourage thrift, self help and co-operation among the members.
 To raise a common good fund for promoting the education of Dravidian boys and girls.
 To issue cheques on and collect cheques, drafts through cooperative Banks with which this bank may
have accounts.

The authorized share capital of the bank is Rs. 9.55 lakhs, which consists of 10113 “A” class members
whose share is Rs.25 each.

The maximum borrowing power of the bank shall not exceed 15 times the paid -up share capital and
reserve fund. Individuals are admitted as members of the bank after proper scrutiny of their application and
approval of the board of directors. The liability of the members is limited only to their share holdings in the
bank.

The administration of the bank is vested in the hands of Board of Directors consisting of 12 Members
elected by the members. The Directors have to elect, one among them as chairman to look after the day -to-day
administration of the bank. There are 15 employees working in the bank. The Board of Direct ors and the
employees are under the direct control and guidance of Managing Director.

Periodical inspections are undertaken by cooperative department, in addition to the statutory inspection
of the RBI. The bank has been classified as “A” class bank for audit purposes. The department of co-operation
of Government of Tamil Nadu deputed two cooperative sub -registrars for the purpose of auditing the accounts
of the bank.

2.6.3 Pattukkottai Cooperative Urban Bank Ltd.

Pattukkottai Cooperative Urban bank Ltd. No.2344, Pattukkottai classified under non agriculture credit
society, was registered on November 5, 1917 and started it business on the same day. Duraimanickam Pillai
took the initiative to start the credit society in Pattukkottai.

Pattukkottai Cooperative Urban Bank started in the year 1917 had a humble beginning as a non -
agriculture credit society. Slowly but steadily the society stretched its arms widely, became an Urban
Cooperative Bank and covered almost all fields of banking and served all se ctor of the public in urban, semi-
urban and rural areas in and around Pattukkottai town.

Loans are granted to members on the security of their immovable property and on the pledge of gold
jewels. The bank provides loan to micro, small and medium enterprises in its service area.

PCUB has the following objectives:

 Mobilizing deposits from members as well as non-members.
 Providing loans to members.
 Undertaking collection of bills accepted or endorsed by members and other banking functions.
 Arranging for the safe custody of valuable documents of members.

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The management of PCUB is democratic, being based on the principle of one man
One vote. The management of cooperative society vests in the general body comprising of all the members.
The general body generally meets once in a year. The management of this PCUB is just like any other
cooperative institution. The members can meet together, discuss and decide upon the various matters concerning
the PCUB. For day-to-day management, there is a managing committee. It consists of five to nine members
including President, Secretary and Treasurer. Each member of the managing committee takes upon himself the
responsibility of looking after at least one particular function of the PCUB. For instance, one member s hould be
in charge of deposits, second may look after advances while the third may be in charge of establishment and so
on.

At present all cooperative institutions in Tamil Nadu including the PCUB are under the control and
supervision of the respective special officers. In other words, the Board Management in cooperatives has been
superseded by the Tamil Nadu Government and accordingly the PCUB is also under the special officers‟ control
since 25.5.2001.

2.7 Conclusion
The evolution of cooperative banks in the background of the development of banking in India has been
seen in their chapter. The cooperative banks in the form of societies were existing in India even before the dawn
of professional commercial banks. The cooperative banks were identified as banks for agriculture and rural
industries as they were operating mostly in villages and their clientele were from economically and socially
backward society of India. The volume of business, wide varieties of financial products, higher level of
profitability, legislative support for inland and off shore banking, access to the public for raising capital, etc
have enabled the commercial banks to grow fast. In case of cooperative banks, several hurdles, viz., weak
capital structure, limited area of operation (district/state), dual control (central/state government), non -focus on
profitability (focus on mutual service), lack of professionalism, etc, have proved to be the stumbling blocks for
their growth.

Financial sector reforms and the subsequent dev elopments in banking in India have not spared
cooperative banks. RBI has identified cooperative banks as a vital segment of Indian Banking that facilitates the
development of rural economy and hence takes several steps to strengthen the cooperative sector. Among the
cooperative sector, Urban Cooperative Banks receive special attention of RBI as they are fast in adapting to the
changes when compared to other banks in cooperative sector. Many UCBs in India are now operating
successfully undertaking most of the banking activities of commercial banks. Consolidation of these banks will
emerge as a strong banking sector in India.

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