{"id":52857,"date":"2019-10-06T15:30:41","date_gmt":"2019-10-06T10:00:41","guid":{"rendered":"https:\/\/blogadmin.forumias.com\/?page_id=52857"},"modified":"2019-10-06T15:31:06","modified_gmt":"2019-10-06T10:01:06","slug":"answered-cooperative-banks-over-the-years-have-extended-the-credit-to-rural-india-helping-in-rural-development-in-light-of-this-discuss-the-impact-of-recent-punjab-and-maharashtra","status":"publish","type":"page","link":"https:\/\/forumias.com\/blog\/answered-cooperative-banks-over-the-years-have-extended-the-credit-to-rural-india-helping-in-rural-development-in-light-of-this-discuss-the-impact-of-recent-punjab-and-maharashtra\/","title":{"rendered":"[Answered] \u201cCooperative banks over the years have extended the credit to rural India helping in rural development.\u201d In light of this discuss the impact of recent Punjab and Maharashtra Cooperative (PMC) Bank crisis on overall rural development and lending."},"content":{"rendered":"\n
Demand of the question<\/strong>
Introduction. <\/strong>Contextual Introduction.
Body. <\/strong>Issue of PMC crisis. Impact of PMC co-operative bank crisis. What should be done?
Conclusion. <\/strong>Way forward. <\/td><\/tr><\/tbody><\/table>\n\n\n\n

A Co-operative bank is a financial entity which belongs to its members, who are at the same time the owners and the customers of their bank. Recently, the Reserve Bank of India (RBI) imposed restrictions on withdrawals from Punjab and Maharashtra Cooperative (PMC) Bank, which triggered a panic among bank customers. It has brought to the fore the issue of riskiness of banks, especially co-operative banks and the need to restore confidence among customers. <\/p>\n\n\n\n

Issue of Punjab and Maharashtra Cooperative (PMC) Bank crisis:<\/strong><\/p>\n\n\n\n

  1. Restrictions imposed by RBI on\nwithdrawals of money from PMC bank highlighted the strong case of\nmalfunctioning in dual regulatory system in urban cooperative banking system.<\/li>
  2. This case reflected 3 major\nproblems- financial irregularities, failure of internal control and system, and\nunderreporting of exposures.<\/li>
  3. Since, PMC has deposits from other\nsmaller cooperatives banks, the financial irregularities which includes\ngovernance and transparency issues will likely to have multi-dimensional\nimpact.<\/li><\/ol>\n\n\n\n

    Impact of PMC co-operative bank crisis:<\/strong><\/p>\n\n\n\n

    1. A crisis of co-operative banks would\nlead to reduction in consumer\u2019s confidence.<\/li>
    2. This will have an overall negative impact\non lending and rural development, and would add up to already slowing down\neconomy.<\/li>
    3. The biggest worry is that this crisis\nat (PMC Bank) can have a cascading effect. Nearly 130 smaller banks have\ndeposits at PMC Bank, and if the lender is unable to return their money, all\nthese small banks will have to mark their deposits as NPAs. Cooperative banks\noperate on thin margins and this NPA will mean they will all be in loss,\ntriggering a wider crisis. <\/li>
    4. Further this crisis would hinder the\nco-operative movement and would lead to extra burden on farmers which depend on\nco-operatives for loans. They will be forced for being exploited at the hands\nof money lenders.<\/li><\/ol>\n\n\n\n

      Solution to resolve the issue:<\/strong><\/p>\n\n\n\n

      1. The merging and converting some of\nthe cooperatives banks to small finance banks and the same in form of scheme\nfor voluntary transition of urban cooperative banks into small finance banks is\nneeded.<\/li>
      2. There is need to set up an\nindependent regulator for Urban Cooperative Banks.<\/li>
      3. A board of management as recommended\nby H Malegam committee of eligible and proper persons as opposed to elected\nDirectors should be established.<\/li>
      4. RBI should be empowered to implement\nresolution techniques such as winding-up and liquidating banks, without\ninvolving other regulators under the cooperative societies\u2019 laws.<\/li>
      5. Accountability for erroneous audit\nalong with penal action should also be ensured through appropriate statue.\nFurther, the state government should also conduct a forensic Audit of the loan\nportfolios & purchases of a representative sample of cooperative banks.<\/li>
      6. The RBI must ensure that Cooperative\nBanks adopt more professionalism in order to retain people\u2019s confidence in the\nbanking sector.<\/li><\/ol>\n\n\n\n

        The PMC Bank crisis has also broken out at a time when most cooperative banks and cooperative housing societies are rushing to hold their annual general meetings (AGM) before the September 30 deadline. Though the AGM of PMC Bank has been postponed amid the ongoing crisis, fireworks are likely at meetings of other urban cooperative banks.<\/p>\n","protected":false},"excerpt":{"rendered":"

        Demand of the question Introduction. Contextual Introduction. Body. Issue of PMC crisis. Impact of PMC co-operative bank crisis. What should be done? Conclusion. Way forward. A Co-operative bank is a financial entity which belongs to its members, who are at the same time the owners and the customers of their bank. Recently, the Reserve Bank… Continue reading [Answered] \u201cCooperative banks over the years have extended the credit to rural India helping in rural development.\u201d In light of this discuss the impact of recent Punjab and Maharashtra Cooperative (PMC) Bank crisis on overall rural development and lending.<\/span><\/a><\/p>\n","protected":false},"author":61,"featured_media":49132,"parent":0,"menu_order":0,"comment_status":"open","ping_status":"closed","template":"","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"class_list":["post-52857","page","type-page","status-publish","has-post-thumbnail","hentry","entry"],"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/pages\/52857","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/pages"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/page"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/61"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=52857"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/pages\/52857\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media\/49132"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=52857"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}