FINANCE

CO-OPERATIVE SOCIETIES AND BANKS

The co-operative movement envisages the development of co-operative credit societies, multi-purpose societies, land mortgage banks, non-agricultural credit societies and the central co-operative bank. It was started in India during the first decade of the present century following the Co-operative Credit Societies Act passed in 1904 to reduce rural indebtedness and bring credit facilities within the reach of agriculturists. In the East Khandesh district the beginning of the co-operative movement was marked by the registration of the first co-operative society at Bodwad, taluka Bhusawal, in 1906. Since that date the movement spread in each corner of the district. The Acts of 1912 and 1928 led further to the organisation of different types of societies. The amended Act of 1912 removed some of the deficiencies of the former Act. It abolished the distinction between rural and urban societies. Instead, societies were classified as "limited liability" societies and "unlimited liability" societies. The registration of central societies, such as the Provincial and District Central Bank and Supervising Unions, consisting of individuals and societies was rendered possible under the provisions of the new Act. Besides, as the word 'credit' disappeared from its title. many non-credit type of societies were also registered under its provisions. Thus, with the passing of this Act of 1912, new energy was infused into the movement. There was an increase in the number of societies and members and the amount of working capital. After co-operation became a transferred subject, the Bombay Province passed the Bombay Co-operative Societies Act, 1928, which, unlike the former Act, was applicable to all the persons having common economic needs, whether their means were limited or not. It not only improved upon the old legislation but it also widened the scope of the Act. Later on this Act went through several amendments. However, the Cooperative Movement received considerable impetus when this Act was finally amended in post-war years due to peculiar conditions of that time. The following is a description of the nature and growth of agricultural co-operative credit societies, multi-purpose societies, the land mortgage bank, non-agricultural credit societies, the District Central Co-operative Bank and other types of societies in the district.

The major number of societies were organised in rural areas. To-day there are 803 agricultural credit societies in the district. These societies, constituting the bulk of the co-operative credit societies, are engaged in the supply of short-term and intermediate term (not exceeding five years) finance to agriculturists. Each society has usually only a single village as its area of operation, hut in some cases, hamlets and smaller villages in the neighbourhood for which it is not possible to organise separate societies are also included in its jurisdiction. Membership is open to all residents of that area who satisfy certain conditions laid down in the bye-laws. The liability of members is unlimited.

Funds.

Funds are raised both from internal as well as external sources. Loans and overdrafts from other co-operative institutions constitute the most important external source. The main internal source is the share capital.

The societies also accept savings deposits fixed for not less than six months. Savings deposits are accepted from members only on conditions laid down in the bye-laws. The rate of interest on deposits is fixed by the managing committee with the previous approval of the financing agency.

Loans are granted by these societies both for agricultural and domestic purposes. They may be for a short-term (not exceeding one year) or for an intermediate term (not exceeding three and in some cases live years). Short-term loans are granted for purposes of meeting expenses of seed, manure, weeding, etc. Intermediate term loans are granted for two purposes, viz. (I) for purchase of bullock carts, iron implements, etc., and for ceremonial expenses, the period of the loan being three years, and (2) for payment of old debts and works of land improvement, the period of the loan being five years.

Normal credits are fixed for each member. There is a limit fixed as normal credit for each member and loans beyond this limit are not advanced to him. The total oustandings by way of loans cannot, in the case of any member, exceed ten times the amount of shares standing to his credit in the society. Loans are given mostly on the personal security of the borrower supplemented by two good sureties, who are members of the society. The society may also take mortgage of immovable property or of crops as collateral security. Loans are given in cash, but where the purpose of the loan permits and a suitable organisation exists loans arc advanced in kind.

The rate of interest charged by agricultural co-operative credit societies depends upon their financial position as also on the rate at which they borrow from the financing agency. They have taken steps to reduce the rate of interest without loss to themselves. Government have offered various facilities by way of subsidies to meet certain expenses of the societies.

The number of agricultural co-operative credit societies (limited and unlimited) in the district during the year 1950-51 was 744 with a membership of 41,701, and a working capital of Rs. 1,10,12,812. By 1958, the agricultural societies numbered 803 with a membership of 88,105 (their number increased considerably by 1955-56). The number of agricultural credit societies has reduced during the year 1957-58 owing to the amalgamation of weak and uneconomic units.

The following table shows the working of the agricultural credit societies: —

TABLE No. 3

 STATISTICS OF WORKING OF AGRICULTURAL CREDIT SOCIETIES, LIMITED (1949-50 TO 1956-57)

Contd..

TABLE No. 3—contd.

 STATISTICS OF WORKING OF AGRICULTURAL CREDIT SOCIETIES, LIMITED (1949-50 TO 1956-57)-Cont.

Contd..

TABLE No. 4

STATISTICS OF WORKING OF AGRICULTURAL CREDIT SOCIETIES, UNLIMITED (1949-50 TO 1956-57)

Contd..

TABLE No. 4—contd.

STATISTICS OF WORKING OF AGRICULTURAL CREDIT SOCIETIES, UNLIMITED (1949-50 TO 1956-57)—Cont.

continued..

In the field of agricultural co-operation, the emphasis has been shifted from credit co-operatives to multipurpose societies coupled with the linking up of credit with marketing. There is a growing recognition of the fact that agricultural co-operation which stops short with provision of resources and services of individual agriculturists, will not attain to its full stature and secure a full measure of economic, social and psychological satisfaction to its adherents unless more comprehensive cooperative activities are undertaken through different types of farming societies on an increasing scale and unless more avenues are opened up for fruitful employment of leisure imposed upon many people. Thus in addition to thrift and credit societies there is a steadily growing number of multipurpose and other societies.

The multipurpose societies serve the rural sector in many ways. In addition to the supply of finance, they also undertake various activities for the betterment of life of the villages such as supplying pure seeds and improved implements, saving litigation expenses by measures of arbitration, effecting consolidation of holdings, marketing the produce of the members, etc.

Government aid.

Government have authorised the Registrar of Co-operative Societies to sanction loans to a multipurpose society undertaking construction of a godown for storing agricultural produce and other requisites to the extent of two-thirds of the cost of construction at the rate of four per cent per annum subject to a maximum of Rs. 2.000, A loan exceeding this sum may be granted with the prior permission of Government.

The liability of members in the case of a multipurpose society is limited. In calculating the total amount of liability that a society can incur, in the case of multipurpose society specified in that behalf by the Registrar of general or special order, a sum equal to the amounts borrowed by such society from a central financing agency for giving advances on the security of agricultural produce is deducted from the amount of the actual liability of such society. In all other matters, like constitutions, raising funds, granting of loans, and rates of interest, multipurpose societies follow the agricultural co-operative credit societies.

Following table indicates the growth of multipurpose societies in the Jalgaon district since 1956. There is an appreciable increase in the number of societies, total membership, share capital, reserve and other funds, total deposits and working capital. It is significant that by 1958 a considerably large percentage of the villages was covered by multipurpose and other kinds of societies.

Primary Land Mortgage Banks.

Land mortgage banks are specially organised and equipped to perform the essential function of providing long-term credit to the cultivators. The area of operation of such a bank is generally a district or a part thereof not smaller than a taluka. The main purposes for which hanks advance loans arc debt redemption, adoption of improved methods of cultivation, purchase of land for development and its improvement, and installation and purchase of costly agricultural plant and machinery. Loans of not less than Rs. 400 and not more than Rs. 1,500 are given to an individual for definite object, subject in every case to the sanction of the State Co-operative Bank. Loans are granted against the security of landed property. The land offered in mortgage by the applicant should he of his absolute ownership, free from any prior encumbrances and not subject to any restrictions and alienations. Loans are given up to SO per cent of the value of immovable property mortgaged to the bank. The period of repayment of loan varies from live to twenty years.

In the Jalgaon district there are at present two land mortgage banks situated at Pachora and Jalgaon and are catering to the needs of long-term financial requirements of the people. The accompanied table shows the operations of these banks in the district.

TABLE No. 5

WORKING OF PRIMARY LAND MORTGAGE BANKS, JALGAON DISTRICT

Contd..

TABLE No. 5-contd.

WORKING OF PRIMARY LAND MORTGAGE BANKS, JALGAON DISTRICT

Contd..

From the table it is clear that there has been a gradual increase in the number of members, the share capital, the working capital of these banks as well as in the amount of loans advanced by them.

The amount advanced by them, for example, has increased from Rs. 1,81.050 in 1955-56 to Rs. 2,30.053 in 1957-58.

Non-Agricultural Credit Societies.

These are mostly urban societies supplying credit to members who are generally traders, artisans, factory workers, salary earners, etc., residing in towns. These societies include urban banks, salary earners' societies and communal societies.

The area of operation of a society of this type is usually restricted to a town or part of a town or even a factory or a department. Membership is open to all persons., residing within the area of operation and the liability of members is limited. No person, however, can become a member of more societies than one. without the prior sanction of the Registrar or Assistant Registrar. Capital is raised by issue of shares, accepting deposits on current savings and fixed account's and borrowing from the central financing agency. The limit to outside borrowing is restricted to eight times the paid tip share capital plus the accumulated reserve and building fund minus the accumulated losses.

Advancing loans to its members at moderate rates of interest is the main function of the societies. Loans arc advanced on personal security, on mortgage of property or on the security of valuables pledged or produce hypothecated. Cash credits are allowed and overdrafts sanctioned on any of the securities. These societies carry on modern banking operations like issue of hundis and drafts and collection of cheques, hundis, drafts, etc. The urban credit societies and banks undertake discounting of short-dated hundis and usance bills on behalf of the members. They also undertake any business approved by the Registrar by a special or general order with a view to sec tiring better results and introducing and popularising better methods of production amongst ifs members. In the Jalgaon district there are at present 51 non-agricultural credit societies catering to the credit requirements of the urban people. Total loans granted by them amounted to Rs. 2.22.01,249 during 1952-53. The full working of these societies is shown in the following table: —

TABLE No. 6

WORKING OF NON-AGRICULTURAL CREDIT SOCIETIES, LIMITED, JALGAON DISTRICT

Contd..

TABLE No. 6—contd.

 WORKING OF NON-AGRICULTURAL CREDIT SOCIETIES, LIMITED, JALGAON DISTRICT

Contd..

Pilot Scheme.

With a view to encouraging the co-operative movement, The Goverment drew up a Pilot Scheme for the Jalgaon district in the light of the recommendations made by the Rural Credit Survey. The recommendations included an extension of agricultural credit including short-term, long-term and medium-term needs of agriculturists, regulation of marketing of agricultural  produce, effect i.e linking-up of credit and marketing, reorganisation of rural credit structure by effective State-partnership, organisation of processing societies and so on. The Pilot Scheme in this district was implemented in 1955. Due to the implementation of this scheme great emphasis was laid on the organisation of large-sized multipurpose societies. These societies were organised either by way of conversion of existing agricultural primaries or by amalgamation of weak and uneconomic agricultural primaries. Owing to this policy the number of agricultural credit societies has been reduced. For instance, during 1956-57, 110 societies were organised by way of conversion of agricultural credit societies. The following table will indicate how the Pilot Scheme was successfully implemented in the district with particular reference to the organisation of large-sized multipurpose societies: —

Following are some of the salient features of the Pilot Scheme: —

The scheme is intended to cover all the villages in the district, and also to bring 75 per cent of the population under co-operative fold. Provision of adequate finance and effective linking-up of credit with marketing are other features of the scheme.

The following table will reveal the extent to which financial assistance has been granted by the Government to the co-operative societies since the Pilot Scheme has been started: —

TABLE No. 7

GOVERNMENT AID TO CO-OPERATIVE SOCIETIES FROM 1955-56 TO 1957-58

TABLE No. 7—contd.

*For multipurpose societies.

†For marketing, societies.

The participation of State in the co-operative movement, thus, has resulted in a considerable augmentation of the financial structure of the societies.

The Second Five-Year Plan, which commenced soon after the completion of first year of Pilot Scheme, was formulated on the recommendations of the Rural Credit Survey Committee. The State-partnership in the capital of the co-operative societies was continued tinder the plan and large amount of financial assistance was granted by the Government under different schemes (see the table). If will. thus, be seen that the co-operative movement in this district has made remarkable progress in all directions. At present there are almost all types of co-operative institutions in this district. The introduction of Pilot Scheme has given a good fillip to the rapid development of credit on one hand and marketing on the other.

TABLE No. 8

 JALGAON DISTRICT—STATISTICS OF WORKING OF URBAN CO-OPERATIVE BANKS

TABLE No. 8-contd..

TABLE No. 8-contd..

TABLE No. 8-contd..

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