Banking on cooperatives is better business

Cooperatives are wealth creators:

The need for cooperatives in wealth creation arises mainly due to the reason that a cooperative can create more value or surplus than the individual can. Conceptually, if a cooperative is well run, it will bring more benefits to its members. The organization and management of a cooperative enterprise, however, is complex. It is more complex in the case of rural cooperative credit structure as (1) this structure is part of the overall financial structure and has a contributory responsibility to the financial stability (2) it has to abide by the regulatory policy and procedures and (3) its capital structure demands continuing infusion of capital under Basel III.

Crude Shocks keep India in Smiles

B. Yerram Raju  & Nitin Gupta*

“The economics of oil have changed. Some businesses will go bust, but the market will be healthier,” says the Economist (December 6, ’14). Is this the beginning of cheap oil regime or just an interlude between two big bumps?

2013, in retrospect,  had turned out to be the strongest year of recovery, with growing US Economy and stabilizing Chinese economy. Commodity prices were projected to remain flat with an up-side risk due to unexpected supply-side shocks.

Enter December 2014 and all the projections seem little more than wishful thinking. IMF went on record recently: “the global economic growth may never return to pre-crisis levels” ! All the Quantitative Easing (QE) from the US (3 till now – totaling over $ 4 trillion or, twice that of the entire Indian economy) which was supposed to push cash to banks ended up just in increased valuations and stock indices accompanied by higher prices of gold and other commodities. Emerging economies like India had to contend with high inflation. Some even said: it is ‘US Fed exported inflation’!

Rural Cooperatives

Rural Cooperative Credit Structure beg for urgent reforms

Cooperatives with their spread are the best means for reaching the goals of financial inclusion and Jan-Dhan.

Their form and content needs change. Meaningful recommendations of Vaidyanathan Committee have been implemented more in breach. The States that received the reform package have breached on the MOUs and misspent the grant released and NABARD also did not put its heart in the monitoring of the grant assistance.

GOI should recall the grant assistance from all these states or should give them an year's time to re-engineer the rural cooperative credit structure to the promised health. 

The vast potential of cooperatives can be fully utilised only through de-bonding them from the politicians and vested interests and by ushering in legal and governance reforms. 

SBI should keep its eyes and ears open

Efficiency of banks does not go by the size of capital but by the performance and perception of the customer. SBI chairman, Arundhati Bhattacharya at the Delhi Economic Conclave sidelines has been arguing for freedom to decide on mergers and acquisitions be left to the banks themselves. Yes, it is the banks concerned and their boards that should take a responsible call on the issue. Has SBI taken stock of the issues that came up in its acquisition of the two of its Associates and the HR problems it had to handle and perhaps continuing to handle? Does it have a discussion forum where the customers and clients of the merged banks would also have a say? SBIs' ATMs are most times inefficient delivery points. They bask under the glory of their associate bank ATMs. Their attention to the customers has much to comment. Their corporate loans are the big ticket NPAs because of unperceived credit risks and poor due diligence. They are living by legacy.