Importance and weaknesses of cooperative banks in india
Answers
Cooperative banks are mainly formed
for development of people and community. The public and private sector
banks are set up for different purpose. They are for improvement in economy and
to allow flow of funds through the system. Cooperative banks are also governed
by the Reserve Bank of India like the other banks.
Importance:
Cooperative banks are mainly customer owned. They are owned by the
set or people or community forming that bank. These are managed in a democratic
way. All members have a say and voting right. The business is done in order to
do community development. The profits are partly shared among the members and
partly accumulated into a fund. This fund is useful for welfare schemes and for
future contingencies.
These banks are available at each level ie., state level, district
level and town/rural level. The accessibility into the people is high. The
state level cooperative bank is the top authority.
The advantage of cooperative banks is the people's participation,
people's direct benefit, people's management, profit earning, growth in the
community, their participation in the economy of the country. Cooperative
banks operate where the public sector and private sector banks do not operate.
Weaknesses:
Cooperative banks are not very tightly controlled by banking system. Their working models and the theory do not have strong models and control theories. Cooperative banks being mainly loan oriented, they are reduced to loan giving. Often they are controlled too tightly by the state level.
Cooperative banks are often fundless. Some banks are not properly functioning either due to lack of funds or due to bad recovery of loans, or due to too much of control by state level or due to no proper control. Cooperative banking is working good in some states of India and is not showing good progress in many states.
Change in these banks with newer technologies and computerization is not totally up to date. They are not totally in the network with all other banks. Funds recovery is a problem for these banks.
Answer:
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