Page 35 - Banking Finance September 2020

ARTICLE

operative societies under the provisions of, either the
respective State Co-operative Societies Act(s) of the state
concerned or the Multi-State Co-operative Societies Act
(2002) of the union of India. These are essentially
cooperative societies, licensed by the Reserve Bank of India,
for conducting banking business. UCBs have a heterogeneous
geographic and size-wise distribution in India.

As on March 31, 2018, out of the total number of UCBs in
India, three states had the most number of UCBs, namely,
Maharashtra (32%), Karnataka (17%), and Gujarat (14%).
In terms of business, as on March 31, 2018, there were 1551
UCBs (Figure 1) with an aggregate deposit and advances of Figure 1: Structure of Urban Co-operative Banks in
Rs. 4565 billion, and Rs. 2805 billion, which were about 3.9%, India (2018)
and 3.2% of the aggregate deposits and advances of the [Source - Database on Indian Economy, Reserve Bank of
scheduled commercial banks respectively as per the report
India]
on Trend and Progress of Banking in India.
Banking Structure In Germany
Despite not boasting of very significant size, the UCBs have
a reasonable socio-economic significance due to their Germany's banking system comprises of three key segments,
interface with a good number of clients coming from lower- called pillars - private commercial banks, public-sector
medium socio-economic strata in India. However, there have banks, and cooperative banks (Figure 2).
been concerns with regard to financial soundness and quality
of corporate governance in UCBs.

As per the information available in the annual report (2017-
18) of Deposit Insurance & Credit Guarantee Corporation
(DICGC), a subsidiary of Reserve Bank of India, 345 UCBs
have gone into liquidation starting from the year 1977 up
to March 31, 2018.
These bank liquidations involved the settlement of
depositors' claims amounting to about Rs. 48 million. Figure 2: German Banking Structure - Three Pillars
Considering the limited coverage of Rs. 0.1 million per [Source - DZ Bank AG Corporate Presentation, https://
depositor by DICGC, it is certain that a number of depositors www.dzbank.com]
would have lost their money in these UCBs.
The private commercial banks account for about 40% of
In case of India, though a deposit insurance coverage for total assets in the German banking system. The public
deposits up to Rs. 0.10 million is available for all bank banking sector, comprising savings banks represents about
depositors, there is neither any effective umbrella 26% of total banks' assets. These banks have local
organization, or central institution, nor any institutional set
governments, such as municipal corporations, and local
up for resolution, restoration, or protection scheme for
cooperative banks, especially the Urban Cooperative Banks bodies as their owners and operators in the area under their
(UCBs). respective local governments. The cooperative banking
sector in Germany consists of local cooperative banks and
The German Cooperative banking model with its unique one central bank, namely, DZ Bank AG. The cooperative
institutional protection scheme through an umbrella banks are owned by their members, and they have the
organization could be worth examination and replication in mandate to support their members while also providing
India. banking services to the general public. Like the savings

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