Needs and importance of co operative bank in economics
Answers
Co-operative banks have helped India usher in a new dawn of progress by taking banking to common people in villages and towns across the country. However, they need drastic changes as far as adoption of technology is concerned to catch up with the changing times, writes Elets News Network (ENN).
The principles underpinning co-operative banks across the world include economic upliftment of the members with a great emphasis on preservation of moral principles and human values. In India, too, cooperative banks serve as the lifeline for millions of people, especially those in rural parts of the country, translating their hopes and aspirations into reality.
Before the cooperative movement came into existence in the 20th Century, money lenders ruled the roost — advancing credit to the needy and desperate people at exorbitant rates of interest and sucking every last penny out of them. Though they still exist in India, penetration of cooperative banks across the country has put a stop to the powerful influence they used to wield on the people and the economy in general.
Today, co-operative banks operate across the country side-by-side with commercial banks and play a crucial role in providing need-based finance, especially for people engaged in agricultural and agriculture-based operations including farming, cattle, milk, personal finance, etc, along with some small industries and self-employment driven activities.
However despite all their socio-economic advantages, co-operative banks in India still have miles to go to catch up with the commercial banks, which are swift to adopt changes in an increasingly globalised and connected world.
Parijit Garg, Vice President, CRIF High Mark, which offers credit information services, says, “Over 1,000 cooperative banks are our members. We have very strong coverage across the country especially from southern states and Gujarat. Over the years, cooperative banks have moved to adopting CBS. Some of the large cooperative banks have even implemented Loan Origination Systems. Though the cooperative banks have come a long way in computerising many of the processes, there are many things which can be done on the credit management and risk management front to be almost fully digital.”
Garg believes that co-operative banks adopting data and technology enabled cost-effective solutions “will lead the way in future”.
The need to digitise and build transparency into their systems was recently underscored when nearly 85 per cent of high-value currencies were banned by the government in a move to flush out black money from the system. It was found that most of the co-operative banks were either ill-equipped or dependent on archaic systems to handle measures of such a proportion as demonstration
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The co operative banks are very effective in providing loans to the rural sectors and other cooperative societies. The farmers of the country are benefited by the cooperative banks
Explanation:
- The cooperative banks are the main source of providing loans to individuals, farmers, societies in the rural areas. For providing loans these banks provide for the working capital from their deposits, own funds, by borrowing and many other forms of resources.
- The cooperative banks give loans to the farmers in the country at lower interest rates. The farmers make use of the loans for farming activities and other resources to help them with farming and improving the agriculture sector.
- The cooperative banks also assist the rural industries by giving them credit facilities. The services of the banks are effective in regions where there are lesser sources of banking facilities
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Difference between cooperative bank and cooperative society
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