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Administration and Business Laws from NUJS, Kolkata discusses on the co-
operative banking system in India.
In the modern technical sense, the birth of the cooperative movement and its
applications in the economic field have been traced after the Industrial
Revolution in England during the second half of the 18th and the first half of the
19th century. Cooperation, understood as an economic system today, was born
as a peaceful reaction to the mercantile and industrial economic revolution. Now
cooperation occupies a position of fundamental importance as a form of
commercial organization in almost every country in the world.
Introduction
Cooperation means to live, think and work together to achieve a common goal
through the cooperative principles. It provides a group of people with one or
more common economic needs, voluntarily accepting to combine their human
and material resources and to use them for mutual benefit, through a company
/ organization managed by the group in itself in the democratic line.
After independence, during the first 3 years, i.e. until 1949, it was not possible
to achieve significant development. It was mainly due to the problem created by
the partition and the absence of a concrete program for national reorganization.
However, the leaders of free India could see the importance of the cooperative
movement for a successful democracy. The importance was given to strengthen
the cooperative structure of the country and different provisions were made
through a different five-year plan.
While the initial Five Year plans couldn’t shape up the co-operative banks to
function, it was given greater importance from then on. The Sixth Plan
established a points program for cooperative societies. Its goal was to transform
the societies of primary peoples into polyvalent societies:
1. Rebuild the policies and the cooperative so that it can generate the economic
development of people
2. Extend cooperation activities in the areas of food processing, poultry breeding,
milk production, fisheries and many other related fields.
3. Provide training and guidance necessary for the development of qualified and
efficient personnel.
The Seventh Plan has also given more importance to the growth and expansion
of cooperative societies to ensure public participation and achieve its main
objective, that is, the movement towards social justice must be faster and must
focus more on employment and the alleviation of poverty.
In a cooperative bank, the needs of the clients meet the needs of the owners,
since the members of the cooperative bank are both, i.e. the customer and the
owner. As a result, the cooperative bank’s first goal is not to maximize profits
but to provide the best products and services available to its members. Some
cooperative banks operate only with their members, but most of them also
allow non-member customers to benefit from their banking and financial
services.
Profit Allocation
In a cooperative bank, a significant portion of annual profits, profits or surpluses
are generally allocated to build up reserves. Part of this benefit can also be
distributed to members of the cooperative, with legal and legal limitations in
most cases. In general, benefits are allocated to members through the
employer’s dividend, which is related to the use of cooperative products and
services by each member, or through an interest or dividend, which is related to
the number of shares subscribed by each member.
The bank’s funds consist of equity capital, deposits, loans and bank overdrafts
of state-run cooperative banks and joint ventures. These banks provide loans to
associated companies within the limits of the company’s debt capacity. They
also perform all the activities of a stock exchange.
The state cooperative bank is a federation of the central cooperative bank and
acts as custodian of the cooperative banking structure in the State. Its funds
are obtained from the social capital, deposits, loans and overdrafts of the
Reserve Bank of India. State-owned cooperative banks lend money to
cooperative central banks and to primary companies and not directly to
farmers.
Land Development Banks
The banks for the development of the territory are organized in 3 levels, that is
to say; State, central and primary level and meet the long-term credit
requirements of farmers for development purposes. They oversee state
development banks, the main land development banks located in the districts
and areas of Tehsil in the state. They are governed by the state government
and the Reserve Bank of India. Recently, the supervision of banks for land
development has been taken over by the National Bank of Agriculture and Rural
Development (NABARD). The sources of financing of these banks are the
obligations underwritten by central and state governments. These banks do not
accept deposits from the general public.
The term Urban Cooperatives Banks (UCB), although not formally defined,
refers to primary cooperative banks located in urban and semi-urban areas.
Until 1996, these banks were authorized to lend money for non-agricultural
purposes only. This distinction is not satisfied today. These banks traditionally
focused on communities, localities and workplace groups. Basically, they lend to
small borrowers and businesses. Today, its operating environment has greatly
increased.
Conclusion
The concept of cooperation is as old as humanity and forms the basis for
domestic and social life. Cooperation is just a group instinct in human beings
that allows us to live with others, work with others and help each other in
moments of stress and tension. Without cooperation, the social and economic
progress would not be possible. It’s impossible for anyone civilization to thrive
unless cooperation completes competition in human society, if there is one. This
is because human beings have developed of group life and, therefore, naturally
respond to group and social stimuli. Thus, the cooperative spirit is innate and
intrinsic in human beings.
It is with this in mind that the current system of Co-operative banking has
evolved itself over the years and is still in the process of getting better by
adapting to the changing world scenario as well as catering to the needs of
people at the national level.