Challenges before Co-Operative Movement – Part 1

The Comptroller’s Office Co-operative Bank Ltd., is celebrating 100 years of its meaningful existence. It is a
moment of great pride for all of us. As we commemorate this very special occasion, it is my privilege to greet all our members, customers and the staff and all other connected with this success story. The Co-operative movement started in India in 1904 and is more than 110 years old. Rural indebtedness was a major force for the start of co-operatives in India. Initially these were just to provide credit to farmers in the form of credit societies and gradually some of them converted to Banks. With the formation of RBI in 1935 and the Banking Regulation Act introduced in 1949, co-operatives were given more importance. After Independence the role of co-operatives in rural India was very important in eradication of poverty. Initially the main aim of co-operatives was to get the poor out of the clutches of money lenders. Co-operative institutions are small institutions owned by a small group of members. Co-operative societies mainly cater to the needs of customers from middle, lower middle class and the marginalized segment of the society who are large in numbers. Co-operative banks have immense potential to give service in rural areas and have delivered results in areas where both the state and private sectors have failed. Because of the nature of the UCB’s it can percolate down to the poorest of the poor. After the economic liberalization in the early 1990;s many private and multinational banks opened their offices in our country. Although these banks did not make any impact in the rural areas in the initial years, in the later years they have posed some challenges to the Urban co-operative Banks. UCB’s are making efforts to reorient their functions according to the market demands. Overall progress of the co-operative movement during the last 100 years is very impressive, co-operatives do not
enjoy a level playing field in our country. Government has not provided enough support to the co-operatives, due to
which many problems have been faced by them. There are many restrictions on investments to be made by co-
operative institutions. Unlike the state owned banks and other private banks, UCB’s don’t have direct access to the equity markets. There are restrictions on investments in a single institutions and the overall investments cannot go beyond the limits.