Banking Sector Reforms and Co-operative Credit Institutions in India

This study identifies various issues that need to be resolved to revitalize rural credit delivery through cooperatives in Maharashtra, India.

The paper estimates the viability of two central-level credit institutions, namely, the Sangli District Central Cooperative Bank and the Buldana District Central Cooperative Bank. The paper states that:

• Primary Agriculture Cooperative Credit Societies (PACS) in Maharashtra have a number of problems: slow growth in membership, lack of institutional financing, increase in outstanding loan advances, etc.;
• PACS have been careless in their approach towards scheduled caste and scheduled tribe (SC/ST) members, particularly in terms of coverage, loan advances and recovery patterns;
• There are also wide variations in total and crop loan advances across various districts of the state;
• The most important issue is the mounting overdues and non-performing assets of cooperatives across the state.

The paper concludes that the rural credit delivery system through PACS can be rejuvenated if the major problems facing the system, viz. high transaction costs, poor payment performance, mounting NPAs, the distributional aspects of credit, low coverage of SC/ST members, etc. are tackled with more fiscal jurisprudence.