IASSI-Quarterly

Cooperatives are social enterprises that combine business principles with a social purpose. The short-term cooperative credit structure has a federal three-tier structure with Primary Agricultural Credit Societies (PACS) at the grass roots level, the District Central Cooperative Banks (DCCBs) at the intermediate level, and the apex bank at the state level. Reserve Bank of India (RBI)’s Bakshi Committee recommended that the short-term cooperative credit structure, which was primarily created for the provision of agricultural credit, should provide at least 15 per cent of the agricultural credit in its operational area, gradually increasing to 30 per cent. The committee also recommended that DCCBs should provide at least 70 per cent of their loan portfolio to agriculture. Tumkur District Cooperative Central Bank (TDCCB), for which the long-range plan has been prepared, emerged as a premier bank among DCCBs in Karnataka, in 2013. Projections were made for both deposits and credit, using compound annual growth rate (CAGR) and semi-log regression. In a competitive and market-driven environment, there is a need for DCCBs to diversify in order to remain profitable and that the stringent norms for agricultural lending cannot be imposed. An important component of their diversification is the gold loan, which is a safe bet for the banks. As long as the social sector lending, which means lending to Self-Help Groups and for the Swarna Jayanthi Swarojgar Yojana scheme, along with agricultural lending is adequate, DCCBs can be viewed as having performed their role as cooperative banks. TDCCB can lend for solar irrigation pump sets, encourage organic farming, and also for a wide range of activities.