Cooperative Banks need total revamping

 Cooperative Banks are another source of loot and they are in that sense better than PSBs because PSBs are watched by many and RBI's is solely responsible and accountable for their Regulation and supervision although Governments intervention is very much there to make the PSBs function the way the Government wants. In cooperative banks by and large the loot goes unnoticed and to some extent the depositors are taken care of by the Deposit Insurance Corporation and the Cooperative Banks are slightly different from PSBs and other Commercial Banks. In respect of cooperative banks their regulation supervision, management and administration are under the Control of the Reserve Bank and Registrar of Cooperative societies ie the State Governments. Ownership is practically monopolised by politicians and bigwigs of the area where the banks are set up and there are shareholders who know nothing as to how the banks are run. Deposits come from the shareholders and public but the bulk of deposits come from the shareholders and their friends who take administrative control of the banks. The loot of the bank is well organised and it takes the form of high interest rates on deposits and loans at the Cheapest rates possible and without much of securities to take care of the recoveries in the event of failure of the borrowers to repay the loans. Politicians ,major shareholders, bulk depositors and big borrowers join hands to mismanage the banks and the Registrar of societies and RBI have limited role of only observing  banks incurring regular losses and their going weak one after another.In no way they can stop the loot is the ground reality. NABARD also is involved in the Supervision of a segment of Cooperative banks with the same result. The only way to save the Cooperative banks which are an essential link to promote savings, distribution of loans on an equitable basis to ensure creation of productive assets in the rural and urban segments, is to keep them away from politicians and local bigwigs completely and hand over them to share holders with Cooperative spirit in letter and spirit and run them purely with Professional support on commercial lines.RBI should be completely taken out if necessary by amending the RBI Act, 1934 and the NABARD should be entrusted with the responsibility of Cooperative banks. The major Cooperative banks set up in metro centres can be converted into Commercial banks or can be merged with some PSBs.It is time to stop experimenting with the present arrangement of duel Control on Cooperative banks and losing money on a recurring basis without any value addition either to the society or to the depositors. From this angle, the article has been very thought provoking and needs to be seriously studied and appropriate action taken .

Dr T V Gopalakrishnan