One of the plus points of the cooperative credit system in Maharashtra is its rural network, which primarily caters to the needs of farmers in the remote areas of the State where commercial banks do not have any reach, says Pramod Karnad, Managing Director, Maharashtra State Cooperative Bank Ltd, in an interview with Sneha Mejari of Elets News Network (ENN)
What have been the factors leading to the growth of perhaps strongest cooperative sector in Maharashtra?
The cooperative movement started in the late 18th century and it came to India from the Great Britain. The first cooperative society was registered in 1904, along with the first cooperative act that also came the same year. Even though the first cooperative institute was registered in Gujarat, the movement also gained momentum in the State of Maharashtra. Further, housing societies were registered in Maharashtra at a fast pace. In Gaondevi, the first housing society was formed by Rao Bahadur S S Talmaki and even after 120 years, it still stands tall.
The cooperative act was enacted and implemented in 1906. The credit cooperative societies followed the housing societies. The Maharashtra State Cooperative Bank also has its roots in the credit society. In 1911, we were registered as a bank, which makes us more than 100 years old today. The cooperative movement took momentum in the State in various sectors like housing society, credit society and consumers movement, and subsequently it spread out to sugar and other sectors. Maharashtra as a state had a conducive atmosphere for the growth of the movement.
What role did the Maharashtra State Cooperative Bank play as an apex body in guiding the cooperative banking sector?
There is a three-tier cooperative credit structure in Maharashtra. There are primary agricultural credit societies (PACS) at the ground level, District Central Cooperative (DCC) Banks at the middle level and the Maharashtra State Cooperative Bank as the apex body. Apart from this, we have urban cooperative banks, too. In this structure, PACS are at the grass-root level and play as the foundation of the structure. Out of 95,000 PACS in India, we have more than 21,000 PACS in Maharashtra alone, which is the major chuck. We have 31 DCC banks in Maharashtra, one in each district. Apart from this, we also have the function of leading other non-credit societies, like housing, spinning etc. Our primary concern is to monitor the credit cooperative structure. Out of 21,000 PACS, 5,000 PACS are not viable according to a recent survey. It is our responsibility to turn these unviable PACS into successful ones.
How have the Vaidhyanathan Committee recommendations helped the cooperative bodies in the State?
Following its recommendations, funds were allocated by the Central Government to the credit structure. We are using this fund for technological upgradation of the societies by bringing common accounting system in all the PACS, thus making their work easier. We also get funds from the Government of Maharashtra to strengthen the PACS, as they are the integral part or the foundation of the structure. Every village has a PACS and their members are none other than farmers. So, these societies are for the farmers and by the farmers in most cases. These farmers require the crop loan, equipment loan, agro implements, electric motor pump, pipelines, flattening of their land, funds to dig a bore well, etc.
If we want to provide farmers with funds for a better agricultural produce, it becomes very import that these PACS are in a condition to borrow and repay from the District Central Cooperative Banks, as they are the sole funding agency for the needs of farmers. Over the years, in Maharashtra, we have developed a fantastic network with the 21,000 PACS and also 30,000 branches of the DCC Banks. This is the rural network and is absolutely in the remote areas of the State where the commercialized banks cannot reach. This is one of the achievements of the cooperative credit system in the State.
What are the challenges being faced in driving the credit structure?
We have a State Level Bankers Committee (SLBC), which allocates the share of cooperative banks for crop financing. These crop loans are not only short-term loans but there also medium- and long-term loans for farmers. This share is realised at the beginning of the financial year. Until 2011- 12, the cooperative sector would receive the largest part of this share for short-term seasonal agricultural operations, like crop loans for 11 or 12 months. A total of 70 per cent share was given to DCC banks and the Maharashtra State Cooperative Bank, while 30 per cent went to the State Bank of India and other banks.
The cooperative movement gained momentum in the State in various sectors like housing society, credit society and consumers movement, and subsequently, it spread out to sugar and other sectors
Gradually, some problems emerged in the DCC banks, and therefore, the target could not be achieved. And, this is how their share was diverted to state banks, like SBI or even private banks. Now, the share of 70 per cent has come down to 45 percent for the cooperative banks and the remaining 55 per cent goes to the state-owned banks and the regional rural banks (RRBs). The quantum has shrunk because among 31 district banks, a few banks are not viable. As the Managing Director of the Maharashtra State Cooperative Bank, I am worried as my share is coming down and it is my responsibility to make the DCC banks viable and increase my share.