Why are Co-operative banks treated like an Orphan in comparison to Private/ Public sector banks ?
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1/ There are several Co-operative banks that have been shut down over the years and the depositors are still denied access to their money. But, when it comes to private or public sector banks, then the government and RBI dealt with extreme urgency.
2/ The rationale of this dual Behaviour is dual regulations of Co-operative banks and Other banks.
3/ Regulation of Urban Co-operative banks is segregated between the Reserve Bank of India (RBI) and the registrar of co-operative societies (RCS), while smaller co-operative banks are divided between National Bank for Agriculture and Rural development (NABARD).
4/ The RCS directly submits to the Government. This segregated dual regulation created lack of obedience in the observance of these banks and indirectly paving way for negative corporate governance and also involvement of local politicians.
5/ Even the RBI and NABARD generally donβt have the numbers updated with them of these banks.
6/ Apart from Urban Co-Operative Banks, In rural there are 3 types of Co-Operative banks :- Credit Co-Operative banks, District level Co-Operative Banks and State level Co-Operative banks.
7/ While the Urban Co-Operative Banks have deposit base of βΉ4.45 Lakh crore, the rural Co-operative banks have βΉ5.65 Lakh Crore as per the latest data available.
8/ But after the PMC crisis, the government decided to give more power to RBI to regulate only Urban Co-Operative Banks but still they Rural Co-Operative banks are still not included in these regulation.
9/ The RBI will have more power to audit the books of Urban Co-Operative banks and appoint CEOs. Still don't know why the rural Co-Operative banks are left out from the latest regulations because frauds and deteriorated corporate governance is higher in smaller Co-Operative Bank
10/ Because they banks are generally run by local politicians which in result engage in fraudulent transactions.
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