BANKING TRADE AND COMMERCE

CO-OPERATIVE MOVEMENT

Historical Background: The Co-operative Movement was started in India as a result of the economic distress caused to the peasants during the latter part of the 19th century. The idea of forming a co-operative society to solve the problem of rural indebtedness was first suggested by Fredrick Nicholson in his Report of 1895—97. The Famine Commission of 1901 also stressed the necessity of starting credit societies in India on co-operative basis. A real beginning of the co-operative movement was, however, made when the Co-operative Credit Societies Act of 1904 was passed. The object of this Act was to encourage thrift, self-help and co-operation amongst agriculturists, artisans and persons of limited means. Societies formed under the Act were given legal status and were authorised to raise funds and carry on business in a corporate capacity. They were classified as rural and urban; rural societies were bound to accept the principle of unlimited liability while urban bodies were given a free choice of limited or unlimited liability. This Act, however, was deficient in many respects. The Act of 1912 was, therefore, passed to fill in the lacunae of the earlier Act. It regularised certain practices of doubtful legal validity and made provision for further expansion under proper safeguards. The distinction between rural and urban societies was abolished and a more scientific classification based on the nature of the availability of members, whether limited or unlimited, was adopted. Cooperative societies other than credit societies were allowed to be formed. Registration of unions and federal bodies like central banks was expressly legalised and a number of minor improvements were introduced. The simplicity and the elasticity of the old Act were at the same time preserved and a wide rule-making power was left to provinces to enable them to develop on their own lines.

The war and the post-war period witnessed a considerable progress in the number of societies, their resources and their coverage. In particular, there was a vigorous growth of consumers' movement when the Government decided to appoint co-operative societies as agents for distribution of foodgrains that had run in short supply.

The co-operatives played a vital role after Independence. The rise in prices improved the paying capacity of agriculturists. This had a favourable effect on the position of the co-operative societies.

During the Second Five-Year Plan period (1956 to 1961) development of co-operative movement was given special emphasis under the guiding principles incorporated in the Rural Credit Survey Report, viz.,—

(1) State partnership at all levels.

(2) Linking of credit with marketing.

(3) Education and propaganda in the theory and practice of co-operation.

In the following pages is given the constitution, the structure and the progress of the various co-operative societies in the district.

Co-operative societies and banks consist of: (1) agricultural cooperative credit societies, (2) multipurpose societies, (3) district land development bank, (4) non-agricultural credit societies, and (5) district central co-operative bank.

Agricultural Co-operative Credit Societies: These societies provide long-term and intermediate-term loans to agriculturists mostly for productive purposes, such as, digging of wells, improvement of land, reclamation of fallow land, construction of houses, seasonal agricultural requirements, etc. Loans are given mostly on personal security of the borrower and two other members. The society may accept mortgage of moveable property or crops as collateral security.

The rate of interest charged by the societies varies according to their financial position and the rate at which they borrow from other financial agencies. Government helps to lower the rate by giving subsidies to societies to meet their expenses.

Multipurpose Societies: These societies mark a further stage in the evolution of agricultural credit societies. They are essentially credit societies but their objects are wider in so far as they combine marketing of agricultural produce with the provision of short-term credit. Moreover, they aim at supplying such agricultural requisites as seeds, manures, fodder and arranging for joint sale of the produce. Government has authorised the Registrar of co-operative societies to sanction loans at 4 per cent to a multipurpose society undertaking construction of a godown for storing agricultural produce and other requisites. Government also grants loans to newly started multipurpose societies or branches of existing sales societies.

Non-agricultural Credit Societies: These are mainly urban societies whose members are traders, artisans, factory workers, etc. They also include urban banks and salary earners societies.

The area of operation of such a society is restricted to a town or its part or even a department of any institution, private or Government. Membership is open to all the persons residing within the area of operation. The liability of members is limited.

Capital is raised by the issue of shares, acceptance of current savings and fixed deposits and by borrowing from the central financing agency. Borrowing from outside is limited to eight times the paid-up share capital plus the accumulated reserves and building fund minus the accumulated losses.

These societies advance loans to members either on personal security or on mortgage of property or on the security of valuables pledged. These societies, and more particularly, urban co-operative banks also carry on modern banking operations.

TABLE No. 2

CO-OPERATIVE SOCIETIES IN BHANDARA DISTRICT IN 1967-68.

The number of members of the co-operative societies in the district was 1,50,245 at the end of the year 1968. The co-operative movement in this district covered 1,486 villages. In the beginning of the year 1967-68, the number of co-operative societies of all types was 1,116. During the same year 17 new co-operative societies of different types were established, and 12 old co-operative societies went in liquidation. Thus, at the end of the year the number of these societies stood at 1,121. In table No. 2 is given the number of members, share capital, reserve and other funds, and working capital of each type of society in Bhandara district at the end of the year 1967-68.

Primary Agricultural Credit Societies: In this district, there were 789 primary agricultural credit societies as on 30th June 1968. Out of these, 21 were large sized and the remaining 768 were all small sized. In the beginning of the year 1968, the number of members of these societies was 95,763 but during the year, 4,155 new members were enrolled thus bringing the total number of members to 99,918 at the end of the year. Due to the increase in the number of members, the share capital and reserve fund of these societies also increased. These societies distributed a sum of Rs. 138.58 lakhs as short-term loan and Rs. 46.08 lakhs as medium-term loan to its members during the year 1967-68. During the same year the societies received by way of repayment Rs. 115.87 lakhs as short-term loans and Rs. 29.69 lakhs as medium-term loans extended to its members. The total liabilities of all these societies stood at Rs. 156.87 lakhs as short term loans and Rs. 75.20 lakhs as medium-term loans.

The following table gives the progress made by the societies during the years 1965-66, 1966-67 and 1967-68: —

TABLE No. 3

PROGRESS MADE BY PRIMARY AGRICULTURAL SOCIETIES IN BHANDARA DISTRICT.

District Central Co-operative Bank: The district central co-operative bank generally gives assistance to the primary agricultural credit societies for improving their business potential. The bank also gives loan to industrial societies for increasing their production. The number of branches of the district central co-operative bank was 15 in 1965-66, but in 1967-68 the bank had 17 branches at important centres of trade and industry in the district.

The number of members of the bank was 1,008 in 1965-66, 1,030 in 1966-67 and 1,048 in 1967-68.

The following table gives the progress made by the bank from 1965-66 to 1967-68 and its working during the same period: —

TABLE No. 4

PROGRESS MADE BY THE DISTRICT CENTRAL CO-OPERATIVE BANK IN BHANDARA DISTRICT.

The total amount advanced by the bank to the co-operative societies as short-term loan was Rs. 20.06 lakhs whereas Rs. 41.22 lakhs were disbursed as medium-term loan, during the year 1967-68. In the same year the bank recovered a sum of Rs. 145.73 lakhs including short and medium-term loans. The total recovery of both medium and short-term loans amounted to Rs. 215.35 lakhs. It may be noted that during a bad agricultural season the bank extends medium-term loan to the societies instead of short-term loan.

In the beginning of the year 1968 a sum of Rs. 42,73,976 was due from 20,704 members. During the year 1968-69, certificates amounting to Rs. 38,10,554 were issued to 13,903 members. From the certificates issued previously an amount of Rs. 61,02,146 was still outstanding from 7,069 members.

In the following statement is given the rate of interest on bank loan given to co-operative societies for different purposes: —

District Land Development Bank: The land development bank formerly known as district land mortgage bank gives long-term credit to needy agriculturists for the construction of wells, repair of old wells or for the purchase of oil engines or electric motors to be used for well irrigation. The bank also provides long-term credit for carrying out specific repairs and investments in agricultural holdings. The bank has three branch offices, one each at Bhandara, Gondia and Sakoli.

In the following statement are given the statistics of financial assistance made available by the bank to the poor and needy agriculturists in the district in 1968: —

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