Cooperative Banks
The State Cooperative Bank is a central institution at the State level which works as a final link in the chain between the small and widely scattered primary societies, on the one hand, and the money market, on the other. It balances the seasonal excess and deficiency of funds and equate the demand for and supply of capital. It takes-off the idle money in the slack season and supplies affiliated societies and Central Co-operative Banks with fluid resources during the busy season. It is the vertex of the pyramidal structure in a state for the provision of short and medium-term credit to agriculturists on co-operative basis. These are formed by joining together all districts central cooperative banks in a particular state. It collects funds by way of share capital, deposits from public, loan from commercial banks etc.Objective and functions of State Cooperative Banks
The chief objectives of State Cooperative Bank are to coordinate the work of the Central Banks, and to link Cooperative Credit Societies with the general money market and the Reserve Bank of India. These banks work as real pivots of the Cooperative movement in the state. They act as initial source of credit for seasonal and urgent needs of their members.
Their main functions are:-
(1) They act as banker’s bank to the Central Cooperative Banks in the districts. These banks not only mobilise the financial resources needed by the societies, but they also deploy them properly among the various sectors of the movement.
(2) They coordinate their own policies with those of the cooperative movement and the government.
(3) They form a connecting link between the cooperative credit societies and the commercial money
market and the RBI.
(4) They formulate and execute uniform credit policies for the cooperative movement as a whole.
(5) They promote the wise of cooperation in general by granting subsidiaries to the Central Cooperative Banks for the development of cooperative activities.
(6) They act as a clearing house for capital i.e., money flows from, the Apex Banks to the Central Banks and from the Central Banks to the rural societies and from them to individual borrowers.
(7) They supervise, control and guide the activities of the Central Bank through regular inspections by their inspection staff and rectify the defects in their work. Thus, they act as their friend, philosopher and guide.
(8) They also perform general utility functions such as issuing drafts, cheques and letters of credit on various centres and thereby help remittance of funds.
(9) They collect and discount bills with the permission of the Registrar.
(10) In certain place they also provide safe deposit locker and facilities for safe custody of valuables.
(11) They help the state Governments in drawing up Cooperative development and other development plans and in their implementation.
Problems in the working of State Cooperative Banks
The State Cooperative Banks do suffer from the following problems:-
(i) Poor deposits mobilisation: These banks have not been successful in raising deposits as, even now, individual deposits from less than 25 per cent in many States.
(ii) Undesirable investment of funds: These banks are not followed the guide of RBI about the matter of investment of fund. Despite the advice of the RBI, a cautious policy is not being followed in the matter of investment of the funds which agriculture even now utilised for the purchase of shares in other cooperative institutions; or in making huge advances to the primary cooperative societies; and by way of loans to individuals.
(iii) Failure to assess genuineness of borrowing: The banks have failed in assessing the genuineness of the borrowings of the Central Cooperative Banks. This is evidenced from the fact that the credit limits of such banks had been fixed on the basis of their owned funds without taking into account their past performance; and the bank’s own financial position.
(iv) Ineffective supervision and inspection: Many of the Banks have not taken up this work in right way. Some of the banks have neither adequate nor separate staff for this work. Officers of these banks sometimes pay only ad-hoc and hurried visits.
(v) Book adjustment: Book adjustments are often made regarding repayment of loans. The State Cooperative Banks have failed to check the fictitious transactions of the Central cooperative Banks.
(vi) Increasing overdues: The overdues of the Banks have been showing a rising trend. This is due to the fact that these banks have not followed the prescribed loaning procedure.
(vii) They utilise their reserve funds as working capital.
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