Letter to BS: How to stem the rot that plagues Cooperative banks

Cooperative banks were formed and encouraged to facilitate financial inclusion. While they fulfil this role partially, they are governed by elected members of borrowers who may have limited vision of furthering their own business interest. The Reserve Bank of India’s (RBI) role as a regulator comes in with the intention of safeguarding public deposits as Cooperative banks are allowed to mobilise public deposit. Its supervision lends credibility to Cooperative banks and its absence brings a dent in the safety image.

Cooperative banks thrive in the ecosystem of small business, traders, petty service providers. They have also carved themselves a niche of