The Task Force on Revival of Co-operative Credit Institutions, popularly called the Vaidyanathan Committee, submitted its report a few years ago and many of its recommendations have been accepted partially/in toto by the government/RBI. The purpose of this article is to take a walk down the memory lane and also to see where the banking system stands today.

In the wake of a series of cooperative bank failures like that of Madhepura District Co-operative Bank, a need was felt to find out what exactly ailed the co-operative banking system and to look for remedial measures. It was generally believed that while the reach and growth of the sector was really commendable, there were probably some systemic shortfalls that periodically led to such failures. It was probably also felt that under the co-operative banking umbrella, there were a few authorities calling the shots and that included the state governments which exercised control through the Registrar of Co-operative Societies, the Central Government through a centrally-appointed Registrar for multistate co-operative societies, the Reserve Bank of India (RBI), the NABARD and the like. Hence, there was a multiplicity of control in some cases and definitely dual control was the order of the day for co-operative banks of all hues. It was probably also felt that many of these co-operative banks had to be strengthened as their capital bases were weakened due to the continuous losses and initial poor capital. There perhaps existed a case for closing down a few of these, and merging and amalgamating a few others. All this had to be done without the co-operative banks losing their essential co-operative identity. This then was the background against which the committee was constituted.

The Co-operative Credit Structure (CCS), at least its short-term variety, is basically a three-tier one comprising the Primary Agricultural Co-operatives (PACs), the District Central Co-operative Banks (DCCBs) and the State Level Co-operative Banks (SCBs). NABARD has no data on PACs and according to National Federation of State Co-operative Banks Ltd. (NAFSCOB) data reproduced by the committee there are 1, 12, 309 PACs. The committee also observes that the CCS has more than twice the rural outlets and 50% more clients than commercial banks and the regional rural banks. Data relating to the traditional focus of co-operatives viz., agricultural lending makes, the relevance of co-operative banks in the rural landscape clear.

It would appear that the importance of co-operatives is on the decline if we go by the above table. But as the committee rightly points out, the point to consider is that commercial banks are reducing their presence in rural areas by mergers and closures and their focus has shifted to bigger borrowers. This is clear from .

Governance of Co-operative Banks, District Co-operative Bank, Co-operative Credit Structure, CCS, Primary Agricultural Co-operatives, PACs, District Central Co-operative Banks, DCCBs, State Level Co-operative Banks, NABARD, National Federation of State Co-operative Banks Ltd , NAFSCOB.