Page 34 - Banking Finance September 2020

ARTICLE

INSTITUTIONAL

PROTECTION SCHEME

FOR URBAN CO-

OPERATIVE BANKS:

LESSONS FROM

GERMAN CO-OPERATIVE

FINANCIAL NETWORK

of depositors and accordingly, most of the jurisdictions,
A deposit insurance coverage up to ? 0.10 million per
globally, have deposit guarantee schemes for bank
depositor is applicable for all banks in India, but there is
depositors. However, a deposit guarantee scheme provides
no umbrella or central organization, or any institutional
scheme for resolution, restoration, or protection for the a restricted coverage, does not ameliorate risks at an
co-operative banks, especially the Urban Co-operative institutional level, and does little to protect a bank from
Banks (UCBs). The co-operative Banking in Germany with delinquency and bankruptcy. Moreover, notwithstanding the
quality and effectiveness of a deposit guarantee scheme,
its unique institutional protection scheme through an
bank customers do face inconvenience, difficulty, and losses
umbrella organization could be worth examination and
replication in India. in case a bank's financial position deteriorates.
This is far more important for cooperative banks which play
Introduction an important role in providing banking services and meeting
Inherent risks in banking and fiduciary responsibility of banks the credit needs of the retail, small and medium scale
towards their depositors necessitate a system of protection borrowers, as these face greater challenges due to their
comparatively smaller size, governance issues, regional
About the author functioning, and limited access to the funding market.

Dr Ashish Srivastava Structure of Co-operative Banking in
AGM/MoF
College of Agricultural Banking, India
Reserve Bank of India The primary co-operative banks, popularly known as Urban
Pune Co-operative Banks (UCBs) in India are registered as co-

34 | 2020 | SEPTEMBER | BANKING FINANCE