Developments and Challenges In The Cooperative Banking Sector

Abstract

Cooperative societies, especially cooperative credit societies and cooperative banks, have always played an important part in the socioeconomic development of the country even before independence. Over the years, the Government has been taking legislative and policy measures to enable development of the sector. At present, there is a dual control structure over the cooperative banking sector with matters relating to their incorporation and regulation mainly coming under the State Governments and with the banking aspects under the RBI’s purview. The dissonance created by this is being sought to be minimised through legislative measures like amendments to the Banking Regulation Act, 1949 and through RBI’s initiatives. A deeper oversight by the RBI, especially in fraud risk management, may help the sector and protect the depositors even better. Further, spreading awareness among the members on their democratic rights may improve accountability and transparency in the functioning of cooperatives. The National Cooperative Database being created by the Government may be a right step in this direction. As the cooperative banking sector has immense potential to bring about inclusive development, the Government and the regulators must leave no stone unturned to remedy the problems faced by the sector and to encourage its unhindered development.