The land development banks or SCARDBs provide long-term loans to the agriculturists- a for redemption of old debt, b for improvement of land and methods of cultivation, c purchasing costly machinery, and d in special cases, for purchasing land. These banks grant loans against the mortgage of land and the period of loan varies from 15 to 30 years.
In , the loans sanctioned by these banks were Rs. The amount of loans outstanding at the end-March was Rs. Although numerically the land development banks have grown over the years, they have not been able to make much progress in providing long-term finance to the farmer. The following are the factors responsible for the unsatisfactory performance of land development banks:. There has been uneven growth of land development banks. Other states have made very little progress.
About half of the states have no land development bank. The major problem faced by the land development banks is the existence of heavy overdues. Moreover, the overdues are continuously rising over the years. In , the percentage of the overdues 6f the land development banks has been put between 42 to 44 per cent.
Faulty loaning policies, inadequate supervision, over-utilisation of loans, ineffective measures for recovery, willful defaulters, etc. In view of the seriousness of the problem, the state governments have been advised to draw up and implement time-bound programmes for special recovery drives. In spite of quantitative growth of the land development banks, they have not shown much qualitative improvements in the field of granting loans largely due to inadequate technical and supervisory staff.
Necessary changes in the legislation of cooperative institutions are also required if the lending activities are to be diversified for non-traditional developmental purposes and on the basis of non-landed security.
Other defects of the land development banks can be summarised below:. The Report of the Committee of Direction of All-India Rural Credit Survey has pointed out the unsatisfactory performance of the land mortgage banks now called the land development banks in the following manner:. As a result of effective steps taken by the government and the Reserve Bank of India, the cooperative banking system in India made tremendous progress after independence.
The cooperative credit which was only 3. The total amount of short-term credit granted by the cooperatives increased from Rs. Thus, during the period of about two decades i. Table 1 shows that cooperative credit increased significantly from Rs. Short-term cooperative credit increased from Rs. Medium-term and long-term cooperative loans increased from Rs. Table-2 shows that during 10th Five Year Plan to , agricultural credit from cooperative banks increased from Rs.
In , it was Rs. The cooperative banking system has to play a critical role in promoting rural finance and is specially suited to Indian conditions. Various advantages of cooperative credit institutions are given below:. The main objective of cooperative credit movement is to provide an effective alternative to the traditional defective credit system of the village money lender. The cooperative banks tend to protect the rural population from the clutches of money lenders. The money lenders have so far dominated the rural areas and have been exploiting the poor people by charging very high rates of interest and manipulating accounts.
Cooperative credit system has cheapened the rural credit both directly as well as indirectly:. An important benefit of cooperative credit system is to bring a change in the nature of loans. Previously the cultivators used to borrow for consumption and other unproductive purposes.
But, now, they mostly borrow for productive purposes. Cooperative societies discourage unproductive borrowing. Cooperative credit movement has encouraged saving and investment by developing the habits of thrift among the agriculturists. Instead of hoarding money the rural people tend to deposit their savings in the cooperative or other banking institutions.
Cooperative societies have also greatly helped in the introduction of better agricultural methods. Cooperative credit is available for purchasing improved seeds, chemical fertilizers, modern implements, etc.
The marketing and processing societies have helped the members to purchase their inputs cheaply and sell their produce at good prices. Till the nationalisation of major commercial banks in , cooperative societies were practically the only institutional sources of rural credit. Commercial banks and other financial institutions hardly provided any credit for agricultural and other rural activities. Cooperative credit to the agriculturists as a percentage of total agricultural credit increased from 3.
On the other hand, the agricultural credit provided by the commercial banks as a percentage of total agricultural credit remained almost negligible and fell from 0. After the nationalisation of commercial banks in , the government has adopted a multi-agency approach. Under this approach, both cooperative banks and commercial banks including regional rural banks are being developed to finance the rural sector.
But, this new approach also recognised the prime role to be played by the cooperative credit institutions in financing rural areas because of the following reasons:. This network can neither be duplicated nor be surpassed easily. Cooperative banking system has a federal structure with- a primary agricultural credit societies at the village level, b higher financing agencies in the form of central cooperative and state cooperative banks, c land development banks for providing long- term credit for agriculture.
Such a banking structure is essential and particularly suited for effectively meeting the financial requirements of the vast rural areas of the country. Various committees, commissions and individual studies that have reviewed the working of the cooperative banking system in India have pointed out a number of weaknesses of the system and have made suggestions to improve the system. Organisational and financial limitations of the primary credit societies considerably reduce their ability to provide adequate credit to the rural population.
Despite the fact that the cooperatives have now covered almost all the rural areas of the country, its rural household membership is only about 45 per cent. Thus, 55 per cent of rural households are still not covered under the cooperative credit system. In fact, the borrowing membership of the primary credit societies is significantly low and is restricted to a few states like Maharashtra, Gujrat, Punjab, Haryana, Tamil Nadu and to relatively rich land owners.
The banking Commission has brought out the following reasons for the low borrowing membership cooperative societies:. In spite of the fact that the primary agricultural credit societies in most of the states have been reorganised into viable units, their loaning business has not improved.
As the Seventh Plan has observed that out of primary agricultural credit societies in the country in , only societies had full time paid secretaries. About societies were running at loss.
In so far, the central bank has issued at least 48 directives to UCBs either imposing fresh regulatory measures or extending the existing ones and cancelled six licences. Besides, there have been 75 cases when UCBs have been penalised over non-compliance as compared to just 23 in and just seven in , shows an Express analysis.
Most co-operative banks sit uncomfortably in the heterogeneous banking structure. While big banks continue to gain all the attention, the cooperative banks which play a significant role in credit delivery to the rural population and contribute to financial inclusion remain confined in an unglamourous state. Although the RBI had initiated consolidation among these banks and has been tightening the straps on UCBs over the past few years, the financial soundness of the sector has been of concern reflecting operational and governance-related impediments.
NPA rises, losses balloon up The proportion of gross non-performing assets NPA of urban co-operative banks rose to The financial health of rural cooperatives too, remains fragile amid stiff competition from niche players like non-banking financial companies and small finance banks.
Data from RBI signals deposit deterioration trend to continue well into Secondly, the credit demand remains anaemic. After growing at an average rate of 7. The health of cooperative banks is likely to worsen in post Covid days. Anil Gupta, vice-president and sector head Financial , ICRA, says, UCBs, like other cooperatives, depend on their members for their equity capital requirements or their internal profits to fund their growth.
Table 2: Demographics. This table gives demographics for the members at the end of the period. N indicates the frequency of members and Percent is the frequency expressed as a percentage of all members. Nevertheless, we think that the sample is sufficiently large and the data sufficiently detailed to perform a careful analysis of the reasons why clients trade member shares. Consequently, according to point 1 , in our analysis we refer to numbers of shares traded.
When a customer buys shares on a given date, the amount of interest he will eventually receive depends on the number of complete holding months until the following May.
Concerning taxation, payoffs of member shares are considered as dividends on stocks. But contrary to stocks, trading member shares do not generate transaction costs. If membership is not related to financial reasons, members should only hold one share per member. However, table 3 reveals that members hold approximately It is also worth noting that the median holding is five shares and the third quartile is about 50 shares.
Table 3: Evolution of Shares. Date indicates the month and the year of observation, N represents the number of members present at a given date. Sum and Mean give respectively, the sum and the average number of shares held by members. St-D, Q1, Me, Q3 and P99 gives the standard deviation, the first quartile, the median, the third quartile and the 99 th percentile of the monthly distribution of the total amount of shares held per member.
Apart from the strong growth rate already mentioned, the curve is almost flat between April and May. The reason is simple: trades are frozen just prior to the yearly general assembly. For a more precise understanding of the long-term evolution of membership, we obtained figures of membership for the preceding years. The results show that there were four million outstanding shares in , 4.
These numbers demonstrate that the main part of the increase occurred after the financial crisis, a strong argument in favor of the use of member shares by the bank to respond to increasing capital requirements. Figure 1: Total number of shares over the period.
Number of Shares in millions indicates the number of member shares held by members. Purchases may be realized by clients or non-clients. Among clients, some are already members while others become members by buying member shares. For the latter, we distinguish those who stay clients of the bank from those who leave the bank.
The above categories of share trades may have diverse motivations. For this reason, they will be distinguished in the econometric analysis of the next section. All the numbers on the right hand side are positive. Figure 2: Categories of Clients. Clients on the left of the table are bank customers who can be members or non-members. The first subcategory is the subset of clients who are already members when they buy or stay members when they sell a part of their shares.
The second subcategory is composed by members selling their entire portfolio of member shares. These people can stay as clients of the bank or can leave the bank they become Not Clients. The third subcategory is composed by New Members who purchase member shares while they are non-members before.
Overall, over the month period the trades realized by these two categories are almost equal; the number of sold shares exceeds the number of purchased shares by a few hundred. This finding means that the evolution of the aggregate number of shares is explained by the trades of existing members see panel B. For example, consider the sale of 3, shares in a single trade in October column Max, Panel B of table 4.
Such a trade means that the client sells a part of her shares, giving up the interest accumulated since the end of May, that is, four months of interest.
Such a trade is then irrational except for sales due to liquidity shocks. However, it could be rational to sell shares during the year if another, more profitable, investment is proposed by the bank. Table 4: Evolution of trades of the different sets of Members. This table gives the number of member shares bought and sold by Leaving Members and New Members in the bank.
Date indicates the month and the year of observation, N represents the number of New Members or Leaving Members observed at a given date. Sum, Mean and Me denote the sum, the mean and the median of member shares bought or sold by New Members and Leaving Members at a given date.
St-D and Max are respectively the standard deviation and the maximum of the monthly distribution of member shares bought or sold per member.
Note that in May there are very few transactions because it is not possible to buy member shares if you are not already a member. This table gives the number of member shares bought and sold by Existing Members.
Date indicates the month and the year of observation, N represents the number of Existing Members who buy and sell at a given date.
The bank proposes to clients to purchase automatically without meeting with her financial advisor after subscription member shares on a monthly basis. According to the features of these member shares, it is difficult to determine the rationale for this significant trading activity.
Table 5: Number of Trades over the period. N is the number of members in a given category of trades. First, we distinguish between men and women; second, we define an investor dummy. A client is called an investor in member shares if she buys either more than the third quartile of the distribution of member shares 50 shares , or if she is already a member. Remember that purchasing one more shares does not increase voting rights and the power within the bank.
People buy shares because their wealth increases and they look for diversification; they sell shares because of consumption needs or other liquidity shocks. If trades are motivated by such reasons, the evolution of wealth of buyers and sellers should be different. If these reasons are consistent with the financial theory, we expect that buyers exhibit an increase of their portfolio value and sellers exhibit a decline of their portfolio value during the period under scrutiny.
We construct these curves by computing, for each of the 23, buyers and each of the sellers, their monthly portfolio values from August to August , regardless of the date the trades were realized.
We calculate the following:. The portfolio value of buyers increases by 9. For other clients a slight increase of 3. The result is consistent with the idea that members purchase member shares for investment motives.
The natural interpretation of the decreasing curve for sellers is that customers decide to sell shares because they need money for economic reasons liquidity shocks, buy customer goods etc. To explain the evolution of portfolio values we determine the growth of individual portfolios after one purchase or sale of a member shares.
The growth rate of a portfolio value is evaluated by:. The trade is assumed to be realized during month t. The results are reported in table 6. Conversely, when clients buy member shares, their portfolio values increase significantly, indicating that financial motives are far from negligible.
Table 7 identifies the number of customers who simultaneously trade member shares and financial securities. To better differentiate between investment motives and other motives we classify customers into categories as defined in section 4. Figure 3: Evolution of total deposits: Sellers vs. Approximately 9. Finally, the reinvestment in another product following a sale is almost nonexistent, involving less than 2.
Table 6: Portfolio variation after purchases and sales. Table 7: Member shares transactions bounded to other securities. N gives the number of customers within each of the four categories Other members, Investor members, sellers. First, we capture the heterogeneity between groups of clients by tests of differences in means over a set of variables.
In a second step, we perform a multivariate analysis to test whether some variables influence the number of shares traded by clients. Number of securities denotes the average number of financial securities held by clients the month before a transaction occurs date t To avoid overestimations of the number of financial securities held by some categories of customers, member shares do not count in this variable. Portfolio value gives the total portfolio value in euros of client i in month t Table 8: Sellers and Buyers: mean comparisons.
Female, Investor Members vs. There was the general realization that urban banks have an important role to play in economic construction. This was asserted by a host of committees.
The Indian Central Banking Enquiry Committee felt that urban banks have a duty to help the small business and middle class people. The Mehta-Bhansali Committee , recommended that those societies which had fulfilled the criteria of banking should be allowed to work as banks and recommended an Association for these banks. The Co-operative Planning Committee went on record to say that urban banks have been the best agencies for small people in whom Joint stock banks are not generally interested.
The Rural Banking Enquiry Committee , impressed by the low cost of establishment and operations recommended the establishment of such banks even in places smaller than taluka towns. The Report published in acknowledged the widespread and financially sound framework of urban co-operative banks; emphasized the need to establish primary urban cooperative banks in new centers and suggested that State Governments lend active support to their development. In , Varde Committee recommended that such banks should be organised at all Urban Centres with a population of 1 lakh or more and not by any single community or caste.
The committee introduced the concept of minimum capital requirement and the criteria of population for defining the urban centre where UCBs were incorporated. However, concerns regarding the professionalism of urban cooperative banks gave rise to the view that they should be better regulated.
Large cooperative banks with paid-up share capital and reserves of Rs. This marked the beginning of an era of duality of control over these banks. Banking related functions viz. Towards the late s there was much debate regarding the promotion of the small scale industries. UCBs came to be seen as important players in this context.
0コメント