Regulation of Cooperative Banks in Maharashtra (India): An Overview

  • Satish Shinde Assistant Professor, M.C.E. Society's A.K.K. New Law Academy, Pune.
Keywords: Law, Cooperative Banking, Governance

Abstract

Cooperative banks have completed more than eleven decades of existence in India. The historical genesis of cooperative banks in India was found in the enactment of the Cooperative Credit Society Act, 1904. Today, cooperative banks functions on the basis of cooperative principles such as membership, democratic control and autonomous functioning not only in the urban areas but also in the rural areas by providing various services to their members as well as non-members in terms of accepting deposits, lending money, providing credit facilities. The cooperative banks plays significant role in the progress and development of the national economy. The cooperative banks have made remarkable progress and development in various areas after independence as compared to the progress and development made by them before independence. Cooperative banks have vast network and wide area of operation now a day in India. Cooperative banks are regulated by the cooperative law having effect in that particular state or central cooperative law, the Reserve Bank of India Act, 1934, the Banking Regulation Act, 1949 and other allied enactments. Cooperative banks are also facing various challenges in respect of information technology application and upgradation in its daily working, administration and management; possession of skill and competence by the staff; corruption and others. Author in this article aims (i) to explore provisions of the Reserve Bank of India Act, 1934 applicable to the cooperative banks, and (ii) to examine provisions of the Banking Regulation Act, 1949 applicable to the cooperative banks existing in India as well as in the State of Maharashtra.

References

Indian Institute of Banking and Finance, Co-operative Banking, 4 (2016).
Indian Institute of Banking and Finance, Co-operative Banking, 327 (2016).
The Cash Reserve Ratio (CRR) is governed by section 42 (1) of the RBI Act, 1934 for scheduled cooperative banks. For non-scheduled banks, CRR is governed by Section 18 of the Banking Regulation Act, 1949
Indian Institute of Banking and Finance, Co-operative Banking, 328-332 (2016).
The Banking Regulation Act, 1949 shall not be applicable to a primary agricultural credit society; a cooperative land mortgage bank; and any other cooperative society.
Section 3, the Banking Regulation Act, 1949 Available at https://rbidocs.rbi.org.in/rdocs/Publications/PDFs/BANKI15122014.pdf, last seen on 04/12/2018.
Indian Institute of Banking and Finance, Co-operative Banking, 316 (2016).
Section 5 (b), the Banking Regulation Act,, 1949 Available at https://rbidocs.rbi.org.in/rdocs/Publications/PDFs/BANKI15122014.pdf, last seen on 04/12/2018.
Section 5 (c), the Banking Regulation Act, 1949.Explanation.—Any company which is engaged in the manufacture of goods or carries on any trade and which accepts deposits of money from the public merely for the purpose of financing its business as such manufacturer or trader shall not be deemed to transact the business of banking within the meaning of this clause. Available at https://rbidocs.rbi.org.in/rdocs/Publications/PDFs/BANKI15122014.pdf, last seen on 04/12/2018.
"Banking Policy" means any policy which is specified from time to time by the Reserve Bank in the interest of the banking system or in the interest of monetary stability or sound economic growth, having due regard to the interests of the depositors, the volume of deposits and other resources of the bank and the need for equitable allocation and the efficient use of these deposits and resources. Section 5 (ca), the Banking Regulation Act, 1949 Available at https://rbidocs.rbi.org.in/rdocs/Publications/PDFs/BANKI15122014.pdf, last seen on 04/12/2018
“Cooperative Banks” means a state cooperative bank, a central cooperative bank and a primary cooperative bank. Section 5 (cci), the Banking Regulation Act, 1949 Available at
https://rbidocs.rbi.org.in/rdocs/Publications/PDFs/BANKI15122014.pdf, last seen on 04/12/2018
The “Cooperative Credit Society” means a cooperative society, the primary object of which is to provide financial accommodation to its members and includes a cooperative land mortgage bank. Section 5 (ccii), the Banking Regulation Act, 1949 Available at https://rbidocs.rbi.org.in/rdocs/Publications/PDFs/BANKI15122014.pdf, last seen on 04/12/2018
The “Cooperative Society” means a society registered or presumed to have been registered under any central Act having force or effect at that particular time pertaining to the Multi-State Cooperative Societies, or any other central or state law with reference to cooperative societies having force or effect at that particular point of time. Section 5 (cciia), the Banking Regulation Act, 1949 Available at
https://rbidocs.rbi.org.in/rdocs/Publications/PDFs/BANKI15122014.pdf, last seen on 04/12/2018
Section 5 A, the Banking Regulation Act,, 1949 Available at
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Indian Institute of Banking and Finance, Co-operative Banking, 317 (2016).
Section 6, the Banking Regulation Act,, 1949 Available at
https://rbidocs.rbi.org.in/rdocs/Publications/PDFs/BANKI15122014.pdf, last seen on 04/12/2018.
Indian Institute of Banking and Finance, Technology, Risk Management and Supervision in Co-operative Banks, 207-208 (Reprinted 2016).
“Goods” means any movable property, other than actionable claims, stock, shares, money, bullion, etc., referred to under sub-section (1) of section (6). Thus, a cooperative bank cannot undertake any trading activity, section 6, the Banking Regulation Act, 1949.
Indian Institute of Banking and Finance, Technology, (2016). Risk Management and Supervision in Co-operative Banks, 208 (Reprinted 2016); See also Section 8, the Banking Regulation Act,, 1949.
Indian Institute of Banking and Finance, (2016). Technology, Risk Management and Supervision in Co-operative Banks, 211 (Reprinted 2016); See also Section 21, the Banking Regulation Act, 1949.
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Indian Institute of Banking and Finance, (2016). Technology, Risk Management and Supervision in Co-operative Banks, 215 (Reprinted 2016); See also Section 35, the Banking Regulation Act, 1949.
Indian Institute of Banking and Finance, Co-operative Banking, 321 (2016).
Indian Institute of Banking and Finance, Co-operative Banking, 321-322 (2016).
Section 22 of the Banking Regulation Act, 1949 seeks to introduce a comprehensive system of licensing of banks by the Reserve Bank of India.
Indian Institute of Banking and Finance (2016).Technology, Risk Management and Supervision in Co-operative Banks, 211 (Reprinted 2016).
Section 36, the Banking Regulation Act, 1949.
Indian Institute of Banking and Finance, Technology, Risk Management and Supervision in Co-operative Banks, 216 (Reprinted 2016).
The Committee took note of the increasing sickness of UCBs and attributed the problem of sickness to the five factors, such as: (a) inadequate entry point capital; (b) lack of professionalism and politicization of management; (c) absence of compliance with prudential norms; (d) absence of system for timely identification of weakness; and (e) dual control over UCBs
Kartar Singh, Governance in Co-operative Banks: Need for Reforms, in Rural Credit and Co-operative Development, (Prof. (Dr.) S. B. Verma, Dr. G. P. Sah and S. C. Pathak, 3-5 (2006).
Kartar Singh, Governance in Co-operative Banks: Need for Reforms, in Rural Credit and Co-operative Development, (Prof. (Dr.) S. B. Verma, Dr. G. P. Sah and S. C. Pathak, 8-11 (2006).
Published
2019-04-27
Section
Articles