04th October 2019 The Hindu Editorials Notes- Mains Sure Shot
Question – What are Co-operative banks? Analyse the challenges faced by them.( 25o words)
Context – In late September, the Reserve Bank of India (RBI) imposed restrictions on withdrawals from the Punjab and Maharashtra Cooperative (PMC) Bank, one of the largest urban cooperative lenders.
What is a cooperative bank?
- Co-operative banks are small-sized units organized in the co-operative sector which operate both in urban and non-urban centers. These banks are traditionally centered around communities, localities and work place groups and they essentially lend to small borrowers and businesses.
- They function on the basis of ‘no-profit no-loss’. So they do not pursue the goal of profit maximisation. Therefore, these banks do not focus on offering more than the basic banking services.
- The co-operative banks can be divided into two broad categories – agricultural and non-agricultural.
- While the co-operative banks in rural areas mainly finance agricultural based activities including farming, cattle, milk, hatchery, personal finance etc along with some small scale industries and self-employment driven activities, the co-operative banks in urban areas mainly finance various categories of people for self-employment, industries, small scale units and home finance.
- Since these banks mostly lend to small enterprises, the rate at which they lend money is nearly 5-7 percent lower than that offered by private banks.
- The co-operative banking structure in India is divided into following main 5 categories:
- Urban Co-op Banks
- Agricultural Societies
- District Central Co-op Banks
- State Co-op Banks
- Land Development Banks
History of co-operative banking in India:
- The cooperative banking in India was started mainly to address the problem of rural credit with the passing of Cooperative Societies Act in 1904.
- The objective of this Act was to establish cooperative credit societies “to encourage thrift, self-help and cooperation among agriculturists, artisans and persons of limited means.”
- Many cooperative societies were set up under this Act.
- Soon it was realised that there is a need to regulate these cooperative societies. So the Cooperative Societies Act, 1912, was passed.
- It recognised the need for establishing new organisations for supervision, auditing and supply of cooperative credit. These organisations were- (a) A union, consisting of primary societies; (b) the central banks; and (c) provincial banks.
At present Dual Regulation:
- At present the Co operative Banks in India are registered under the Co-operative Societies Act. The cooperative bank is also regulated by the RBI. They are governed by the Banking Regulations Act 1949 and Banking Laws (Co-operative Societies) Act, 1965.
- So there is a dual regulation – 1) The Reserve Bank of India (RBI) regulates and supervises the banking functions of Cooperative Banks under the various provisions of the Banking Regulation Act, 1949 (As applicable to Cooperative Societies) and the Reserve Bank of India Act, 1934. 2) However, the matters related to incorporation, registration, management, audit, liquidation, etc. in respect of these banks fall under the jurisdiction of the concerned Registrar of co-operative societies. Under Section 35(6) of the Banking Regulation Act, 1949. Also NABARD has concurrent powers to inspect StCBs and DCCBs.
How does this Dual Regulation affect the Cooperative Banks?
- The Registrar of Cooperative Societies (RCS) is in control of management elections and many administrative issues as well as auditing. And the RBI brought them under the Banking Regulation Act as applicable to cooperative societies, which included all the regulatory aspects, namely, the granting of the licence, maintaining cash reserve, statutory liquidity and capital adequacy ratios, and inspection of these banks.
- So, in a sense, urban cooperative banks have been under the radar of the RBI, but because of dual regulation, one always had a feeling that one did not have as much control over these banks in terms of supersession of boards or removal of directors, as the RBI has over private sector banks.
The problems with cooperative banks in India:
- Lack of democratic spirit: Cooperatives need to run on well established democratic principles and elections held on time and in a free and fair manner. it has been observed that majority of the members as well as directors of the society are ill-informed about the activities of the society due to their illiteracy & indifferent attitude.
- Fair audit: It is well known that audits are done entirely by department officials & are neither regular nor comprehensive. Delays in the conduct of audits and submission of reports are widespread. Audit is limited to such accounts as are available and reports seldom examine whether accounts & record are complete, accurate and up to date. Neither the observance of procedures for grant of loans and their recovery nor the veracity of the reported characteristics of borrowers are properly scrutinized.
- Abuse of power by leadership: Those who control cooperative societies are locally powerful, with strong political affiliations.
- Mismanagement and manipulation: The strength of the movement was the involvement of the farmers who were shareholders & members of the society. Over the years, this truly democratic idea got corrupted and wealthier people having political background became more powerful. in practice, this altered the power structure of the cooperatives. In the elections of the governing bodies, money became such a powerful tool that the top posts of chairman & vice-chairman usually went to the richest persons even though the majority of members were farmers with small- or medium-sized Holdings
- Lack of people’s enthusiasm: Right from the beginning the government has adopted an attitude of patronizing the movement. Cooperative institutions were treated as if these were part & parcel of the administrative set up of the government. As a result people’s enthusiasm for the movement did not grow.
- Modern banking practices: They are not having the modern practices of banking in there working viz. net banking, mobile Banking, online banking, e-banking, ATM banking and all other modern banking practices. Due to which they have been eliminated and remained back foot in the modern era of marketing.
- Functional weakness: the cooperative movement has suffered from inadequacy of trained personnel right from its inception.
- Lack of professionalism : Professionalism reflects the co-existence of high level of skills and standards in performing duties entrusted to an individual. The absence of a proper system of placement and skill up gradation inputs constrain professional management in cooperative banks.
- And also to some extent their dual regulation.
- Each of these reasons needs to be analysed in a coordinated way and solution seeked through experts.
- Minimise political interference.
Note: This is a joint analysis of yesterday’s article ‘Miles to go before becoming open-defecation free’ and today’s article titled ‘Toilet Targets’.
Question – Analyse the progress made by India to eliminate the menace of open defecation in India and suggest the way forward.(250 words)
Context – Prime Minister Narendra Modi declared India “open defecation-free”.
Cleanliness and Gandhiji:
- Cleanliness and sanitation were central to Gandhi’s concerns for his vast number of impoverished countrymen.
- October 2 was not only Mahatma Gandhi’s 150th birth anniversary, but also the fifth, and perhaps final, anniversary of the Swachh Bharat Mission. Speaking in Gujarat, Prime Minister declared India “open defecation-free”.
What is open defecation?
- According to UNICEF, Open defecation refers to the practice whereby people go out in fields, bushes, forests, open bodies of water, or other open spaces rather than using the toilet to defecate.
Threats from open defecation:
- Open defecation poses a serious threat to the health of children in India.
- Open defecation exposes women to the danger of physical attacks and encounters such as snake bites. Poor sanitation also cripples national development: workers produce less, live shorter lives, save and invest less, and are less able to send their children to school.
- To get a clearer picture, One GRAM of faeces contains: 10,000,000 viruses, 1,000,000 bacteria, 1,000 parasite cysts
- Women and girls face shame and a loss of personal dignity and risk their safety if there is no toilet at home. They have to wait for nightfall to relieve themselves in privacy.
The present condition:
- Awareness campaigns, media exposure, and pressure from school-age children, are some of the drivers of increased awareness towards behaviour change. Further, with a growing population and increasing agricultural cultivation and urbanization, the number of spaces available for open defecation continues to reduce.
- In 2014, the government made total sanitation a high priority, with the avowed goal of bridging decades of neglect through a policy focused on toilet construction. That 110 million toilets were built under this programme since then counts as an achievement in itself.
- ODF-Plus programme (Open Defecation Free Programme) has been adopted by the Ministry of Jal Shakti to encourage toilet use and create the infrastructure to manage solid and liquid waste in every village.
- Jointly, UNICEF’s WASH, and Advocacy and Communication sections developed the Poo2Loo campaign. This unique campaign deliberately chooses to address the population of young Indians who have a toilet at home, in order to sensitize them to the plight of those who do not have toilets, and create a youth social movement to stand up and advocate for the need for everyone to have a toilet.
- But still many people continue to defecate in the open.
Where did we lack?
- We lacked in the aspect that we created toilets, so the people had access to toilets but they did not develop the habit of using them. So many of these structures have been bootstrapped to ramshackle dwellings and many do not meet construction standards.
- The focus was to increase latrine ownership.
- Researchers from World Bank measured four key aspects of open defecation including defecation practices, acceptability of open defecation, enforcement of toilet use, and notions of purity attached to toilet construction.
- They found that around 40 per cent of people having toilets in their houses did not use them. Many of the respondents associated toilets with gandagi (dirt). People’s beliefs were closely linked to their perception of what others believed. This meant that social norms had a big say on individual attitudes.
Need/ Way forward:
- The researchers concluded that policy makers needed to give proper thought and make adequate efforts to get the desired change in behaviour related to toilet uses.
- The government still needs to give an extra push for heightening awareness among people about the benefits of using toilets.
- Also increasing awareness about the harmful consequences of open defecation through large‐scale behavior change campaigns.