Recommendations of the Task Force on Revival of Co-operative Credit Institutions: Implementation Issues

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Recommendations of the Task Force on Revival of
Co-operative Credit Institutions Implementation
Issues

• M S Sriram
• Indian Institute of Management Ahmedabad

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Basic Premises of the Task Force

• Co-operatives should be self governed, member
  managed institutions. Their future success or
  failure should depend on how they manage it.
• The state in the past has intervened with the
  working of co-operatives and therefore morally
  responsible for the accumulated problems

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Broad Areas of Recommendations

• Legal reform on lines with the MACS Act
• Preparatory work
• Truing of Balance Sheets
• Capacity building and Training
• Computerisation and software
• Implementation of the financial package subject
  to benchmarks

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Issues in Implementation

• Issue 1 Will the states agree?
• Issue of control/supervision
• Eligibility norms for getting the financial
  package
• Performance low-balling due to political
  constituency considerations resulting in an
  overall low-balling

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Issues in Implementation

• Issue 2 Is the logistics possible
• Different from other institutions that have gone
  through reforms
• Daunting numbers
• Manpower for audit, their orientations

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Issues in Implementation

• Issue 3 What about upper tiers?
• DCCBs not eligible for package
• SCBs not eligible for package

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Issues in Implementation

• Issue 4 Will co-operatives be strong after the
  reform?
• Importance of member-stakes
• Importance of member-only transactions (or all
  significant transacting parties made voting
  members)

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Issues in Implementation

• Issue 5 Managing Risks
• Economy being largely agrarian
• Agriculture being vulnerable
• Covariance risk being high
• Need for unbundling risk coverage

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Issues in Implementation

• Issue 6 Is the three tier structure necessary?
• No, but the task force is silent
• Will one of the tiers fade away in the medium
  run? That is a hope.

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Conclusions

• State partnership was needed when AIRCS was set
  up
• State withdrawal is important at this moment
• However, the state will have to think of
  providing access to financial services to areas
  that are not covered by co-operatives through
  alternative mechanisms

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• Thankyou
• www.iimahd.ernet.in/mssriram
• mssriram_at_iimahd.ernet.in
• 079-26324891