Cooperatives are model for inclusive growth: D Subbarao

Weak finances, growing NPAs, poor resourse base factors contributing to declining performance of cooperatives at bottom level

Reserve Bank of India Governor D Subbarao today highlighted the importance of cooperatives as models of inclusive growth. He was addressing a conference at the International Conference on Cooperatives on ‘Leveraging Cooperative Advantage’, organized by College of Agricultural Banking Reserve Bank of India in Pune.

He said, "disenchantment with ‘casino banking’ in certain developed economies underscored the dangers of over-financialization of the real economy. In comparison, the cooperative business has been more resilient. This structure ensures that cooperatives are not enterprises run just for short term profits, but are a business model for long term sustainability and inclusive growth”.

“The recent financial crisis has taught us some very important lessons. Globally, the cooperative movement covers over one billion people generating economic activity, resources and jobs. Hence the cooperative philosophy is an excellent example of a value based business model.Countries with the most significant numbers of people in cooperative membership are India, China and the United States. Countries with significant presence of cooperative banks are Germany, France, the Netherlands and Italy.”

He advised cooperatives to adopt new technology as it has become a major factor in determining the essence of modern banking efficiency.

Commenting on several infirmities of the Indian cooperative sector, he said, “Weak finances, growing NPAs and poor resource base are factors contributing to the declining performance of the cooperatives at the bottom level. These grass root institutions mostly depend on the higher agencies.The cooperative structure is biased in favour of borrowers, and depositors get an unequal treatment. Only borrowers can become members of the cooperative. Depositors are either non-members or ‘nominal’ members with no voting rights. Yet, it is possible to cure these infirmities and revive the cooperative structure into health and vibrancy.”

Speaking on deteriorating financial position of unlicensed cooperative banks issue, he said, “As on April 1, 2012, there still remained 41 cooperative banks which could not meet even the relaxed licencing norms. In order to maintain the
integrity of the cooperative system and to protect public interest, the Reserve
Bank imposed Directions on these 41 banks prohibiting them from accepting
fresh deposits.”

He added, “The growth of cooperatives in India has been impressive and covers a wide array of activities including credit & banking, fertilizer, sugar, dairy,marketing, consumer goods, handloom, handicraft, fisheries and housing. The Indian cooperative movement, comprising around six hundred thousand cooperatives is arguably the largest cooperative movement in the world, providing self employment to millions of poor. (ENDS)