The cooperative bank crisis

30 OCT,2019 | MEDC


 

The minimum capital requirement for a cooperative bank is Rs. 1 lakh – an amount that has remained unchanged since 1949. In today’s world, how can an urban cooperative bank operate with such a small capital base? In that case, there has to be a limit on the amount these banks can lend to a borrower and also the deposits they can accept. That is, obviously, not adhered to. Of course, there are many cooperative banks which have positively impacted the lives of millions, but some of the bigger ones need to be encouraged to become NBFCs or merge with commercial banks in the larger interests of society. A higher capital requirement will force consolidation, and that is probably where policymaking needs to focus. The government should take all possible measures to defuse the current crisis of confidence and assure bank depositors that their money continues to remain safe throughout India.

*Photo Credit: Google

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