Murlidhar Mohol inaugurates new HQ of Belagavi’s Bireshwar Co-op Credit Society

19 Sep Murlidhar Mohol inaugurates new HQ of Belagavi’s Bireshwar Co-op Credit Society

✎ Multi-State Cooperative Credit Societies, governed by the Multi-State Cooperative Societies Act, 2002, are member-driven financial institutions operating across states, providing credit and savings services to underserved…

Subject Relevance — Where This Topic Fits

• GS Paper III — Indian Economy: Issues relating to Planning, Mobilisation of Resources, Growth, Development and Employment
• Prelims: Multi-State Cooperative Societies Act, 2002, Primary Agricultural Credit Societies (PACS), Amul model of cooperative dairy, Urban Cooperative Banks (UCBs), National Cooperative Development Corporation (NCDC)
• Essay: The cooperative movement as a tool for grassroots economic empowerment

Quick Revision: Multi-State Cooperative Credit Societies, governed by the Multi-State Cooperative Societies Act, 2002, are member-driven financial institutions operating across states, providing credit and savings services to underserved communities and contributing to India’s financial inclusion architecture.

Why is this in the news?

The inauguration of the new headquarters of the Shri Bireshwar Cooperative Credit Society Limited (a Multi-State Cooperative Society) in Belagavi, Karnataka, underscores the expanding institutional footprint of cooperative credit institutions in India. The event highlights the government’s emphasis on modernising cooperative governance structures, enhancing financial outreach, and integrating cooperatives with broader economic initiatives such as the ‘Sahkar se Samriddhi’ vision and the establishment of a dedicated Ministry of Cooperation. The society’s scale—4.6 lakh members, 263 branches, and a turnover exceeding ₹9,000 crore—illustrates the operational capacity and developmental potential of Multi-State Cooperative Credit Societies in India’s financial inclusion ecosystem.

Background

• Cooperative credit societies in India trace their origins to the late 19th century, with the first cooperative credit society established in 1904 under the Cooperative Credit Societies Act, 1904, influenced by Friedrich Raiffeisen’s model.
• The Multi-State Cooperative Societies Act, 2002, provides the legal framework for cooperatives operating across multiple states, enabling economies of scale and resource pooling.
• The Union Budget 2021-22 announced the establishment of a separate Ministry of Cooperation to strengthen cooperative institutions, enhance their autonomy, and integrate them with national development priorities.
• The ‘Sahkar se Samriddhi’ vision, articulated by the Prime Minister, aims to leverage cooperatives as instruments for socio-economic transformation, particularly in rural and semi-urban areas.
• As of 2023, India hosts over 8.5 lakh cooperative societies, with approximately 32 crore members, directly impacting 20-25 crore households and forming a critical pillar of grassroots financial inclusion.
• The government has prioritised the computerisation of Primary Agricultural Credit Societies (PACS) under the ‘Computerisation of PACS’ scheme, with an outlay of ₹3,000 crore to modernise accounting, auditing, and service delivery.

What are Multi-State Cooperative Credit Societies?

• Multi-State Cooperative Credit Societies are financial cooperatives registered under the Multi-State Cooperative Societies Act, 2002, and operate across two or more states, enabling cross-state resource mobilisation and credit delivery.
• These societies function as member-owned, democratically governed institutions, providing credit, savings, and other financial services to their members, primarily in rural and semi-urban areas.
• They play a pivotal role in financial inclusion by extending credit to small and marginal farmers, artisans, and other economically vulnerable groups who may lack access to formal banking channels.
• The Shri Bireshwar Cooperative Credit Society Limited, a Multi-State Cooperative Society, exemplifies this model with its pan-India presence, extensive branch network, and significant financial turnover, demonstrating the scalability of cooperative credit institutions.
• Multi-State Cooperative Societies are distinct from Primary Agricultural Credit Societies (PACS), which operate at the grassroots level within a single state and are governed by state-specific cooperative laws.
• The governance structure of Multi-State Cooperative Societies includes a Board of Directors elected by members, an audited financial system, and adherence to prudential norms prescribed by the Reserve Bank of India (RBI) for cooperative banks.
• These societies contribute to rural development by financing agricultural inputs, allied activities, and allied sectors such as dairy, handloom, and sericulture, thereby enhancing livelihoods and economic resilience.
• The government’s push for digitalisation, including the proposed ‘Sahakar Sarathi’ platform, aims to integrate Multi-State Cooperative Societies with national digital infrastructure for seamless transactions and transparency.

Key Features

Feature	Significance
Establishment of a dedicated Ministry of Cooperation (2021)	Formal recognition of cooperatives as a distinct sector, enabling focused policy formulation and institutional strengthening.
Multi-State Cooperative Societies (MSCS) expansion	Facilitates cross-state operations, enhancing resource pooling and economic scale for cooperatives like the featured society.
Computerisation of approximately 80,000 PACS	Improves transparency, reduces leakages, and enables real-time monitoring of cooperative transactions.
Urban Cooperative Banks (UCBs) Umbrella Organisation	Provides regulatory oversight, liquidity support, and risk management for urban cooperatives.
‘Sahakar Sarathi’ platform for rural cooperative banks	Digital tool to streamline operations, training, and governance for rural cooperative banking institutions.

Why it Matters

Economic Integration

• Cooperatives engage over 32 crore members, directly impacting ~20-25 crore households, thus forming a critical pillar of India’s socio-economic fabric.
• Large cooperatives like the featured society (₹9,000 crore turnover, 4.6 lakh members) demonstrate the scalability and financial robustness of the cooperative model.
• Integration of cooperatives into 25+ business activities (e.g., dairy, insurance, logistics) diversifies rural economies and reduces dependency on monsoons.

Policy and Governance

• The establishment of a standalone Ministry of Cooperation (2021) marks a paradigm shift from a departmental approach to a sectoral governance model.
• Centralised decision-making under the Ministry has enabled rapid reforms, including the computerisation of PACS and the creation of regulatory platforms.
• Focus on training (e.g., ‘Tri Bhuvan’ Cooperative University) aims to build a skilled workforce to manage modern cooperative enterprises.

Social Inclusion

• Cooperatives provide equitable access to credit, inputs, and markets, particularly for small and marginal farmers, artisans, and women-led enterprises.
• The featured society’s membership of 4.6 lakh individuals reflects the inclusive nature of cooperative models in mobilising local capital and talent.
• Historical contributions (e.g., Shri Annasaheb Jolle in Karnataka) highlight the role of cooperatives in grassroots socio-economic development.

Technological Modernisation

• Digital platforms like ‘Sahakar Sarathi’ and the Umbrella Organisation for UCBs enhance operational efficiency and reduce systemic risks.
• Computerisation of PACS (₹3,000 crore outlay) ensures transparency, auditability, and compliance with regulatory standards.
• Initiatives like ‘Sahakar Mitra’ and training programs align cooperative enterprises with Industry 4.0 standards.

Challenges

1. Regulatory Fragmentation

• Dual regulatory oversight (RBI for UCBs, state registrars for others) creates compliance complexities and jurisdictional ambiguities.
• Need for harmonised guidelines to streamline operations across multi-state cooperatives and urban-rural divides.

UPSC Link: Cooperative Societies Act, 1912; Constitution (97th Amendment) Act, 2011

2. Financial Sustainability

• High non-performing assets (NPAs) in some cooperative banks pose systemic risks, necessitating stricter risk management frameworks.
• Dependence on government subsidies and concessional credit limits long-term viability; requires diversification of income streams.

UPSC Link: RBI guidelines on cooperative banks; NABARD reports

3. Human Resource Development

• Shortage of trained professionals in cooperative management, accounting, and digital tools hampers growth and innovation.
• Limited research and development in cooperative models compared to corporate or public sectors.

UPSC Link: Tri Bhuvan Cooperative University mandate

4. Digital Divide and Accessibility

• Low digital literacy among rural members limits adoption of e-governance platforms like ‘Sahakar Sarathi’.
• Infrastructure gaps in remote areas hinder seamless integration of cooperatives with national digital networks.

UPSC Link: Digital India initiatives; NITI Aayog reports

5. Policy Implementation Gaps

• Delays in fund disbursement under schemes (e.g., computerisation of PACS) slow down sectoral growth.
• Lack of standardised data collection across states impedes evidence-based policymaking.

UPSC Link: Ministry of Cooperation annual reports; CAG audits

Challenges — UPSC Perspective

Issue	Concern
Regulatory Overlap	Conflicting guidelines between RBI, state registrars, and central ministries create operational inefficiencies.
NPA Crisis	Aggravated by weak governance, political interference, and inadequate risk assessment in cooperative banks.
Skill Deficit	Shortage of professionals trained in cooperative management, digital tools, and financial literacy.
Digital Exclusion	Low internet penetration and digital literacy in rural areas limit platform adoption.
Funding Delays	Bureaucratic hurdles and procedural bottlenecks delay disbursement of central funds.
Data Fragmentation	Inconsistent reporting standards across states hinder national-level analysis and policy design.

Government Initiatives — Must-Memorise for Prelims

• Computerisation of Primary Agricultural Credit Societies (PACS) scheme
• Umbrella Organisation for Urban Cooperative Banks (UCBs)
• Sahakar Sarathi platform for rural cooperative banks
• Tri Bhuvan Cooperative University initiative

Way Forward

• Strengthen inter-ministerial coordination to resolve regulatory fragmentation and ensure harmonised compliance.
• Expand digital infrastructure in rural areas to bridge the digital divide and enhance platform adoption.
• Accelerate skill development through partnerships with agricultural universities, IITs, and industry bodies.
• Rationalise funding mechanisms to ensure timely disbursement and reduce dependency on subsidies.
• Promote research and innovation in cooperative models via dedicated funds and academic collaborations.
• Enhance transparency by mandating real-time data reporting and third-party audits for cooperatives.
• Leverage cooperatives for climate-resilient agriculture by integrating them with PM-KISAN, PM-FME, and other schemes.
• Establish a national cooperative data repository to enable evidence-based policymaking and sectoral analysis.

UPSC Value Addition

Prelims Practice Questions

Q1. Consider the following statements regarding the Multi-State Cooperative Societies Act, 2002:
1. The Act regulates cooperative societies whose operations extend beyond the territory of a single state.
2. The Act mandates that all multi-state cooperative societies must register under the Central Registrar of Cooperative Societies.
3. The Act does not provide for the establishment of a Cooperative Ombudsman to address grievances of members.
4. The Act empowers the Central Government to supersede the board of a multi-state cooperative society in case of mismanagement.

How many of the above statements are correct?

1. Only one
2. Only two
3. Only three
4. All four

Answer: All four — Statements 1, 2, and 4 are correct under the Multi-State Cooperative Societies Act, 2002. Statement 3 is incorrect as the Act does provide for the establishment of a Cooperative Ombudsman to address member grievances.

Q2. Assertion (A): The Government of India has recently launched the ‘Sahkar Sarathi’ platform to strengthen rural cooperative banks.
Reason (R): The platform aims to provide a unified digital interface for training, capacity-building, and governance support to rural cooperative banks.

Code:
(A) Both A and R are true, and R is the correct explanation of A.
(B) Both A and R are true, but R is not the correct explanation of A.
(C) A is true but R is false.
(D) A is false but R is true.

1. A
2. B
3. C
4. D

Answer: B — Both Assertion (A) and Reason (R) are true, and Reason (R) correctly explains Assertion (A) as ‘Sahkar Sarathi’ is designed to enhance the operational efficiency of rural cooperative banks through digital training and governance support.

Q3. Match the following initiatives with their respective objectives in the cooperative sector:

Column I (Initiative) | Column II (Objective)
———————————————–|———————————————–
A. Computerisation of PACS | 1. To provide a unified digital interface for rural cooperative banks
B. Sahkar Sarathi Platform | 2. To modernise and integrate 80,000 PACS nationwide
C. Establishment of Cooperative University | 3. To create a skilled workforce for the cooperative sector
D. Umbrella Organisation for UCBs | 4. To strengthen governance and regulatory oversight of urban cooperative banks

Choose the correct match:

1. A-2, B-1, C-3, D-4
2. A-1, B-2, C-3, D-4
3. A-4, B-3, C-2, D-1
4. A-3, B-4, C-1, D-2

Answer: A-2, B-1, C-3, D-4 — A-2: Computerisation of PACS aims to modernise and integrate 80,000 PACS nationwide. B-1: Sahkar Sarathi Platform provides a unified digital interface for rural cooperative banks. C-3: Cooperative University aims to create a skilled workforce for the cooperative sector. D-4: Umbrella Organisation for UCBs strengthens governance and regulatory oversight of urban cooperative banks.

Mains Practice Question

✍ Critically examine the role of cooperatives in India’s rural economy, with particular reference to their contribution to financial inclusion and agricultural development. Also, analyse the recent reforms initiated by the Government of India to modernise the cooperative sector under the vision of ‘Sahkar Se Samriddhi’. (15 Marks)

Approach: MODEL-ANSWER SKELETON:

1. **Introduction (2 Marks)**
– Define cooperatives and their foundational principles (self-help, mutual aid, democratic control).
– State the constitutional basis (Entry 32, State List; Entry 43, Union List) and the significance of cooperatives in India’s rural economy.
– Mention the vision of ‘Sahkar Se Samriddhi’ and its alignment with the cooperative movement’s goals.

2. **Role of Cooperatives in Rural Economy (5 Marks)**
– **Financial Inclusion**: Explain how cooperatives (e.g., PACS, UCBs) bridge the credit gap for small and marginal farmers, artisans, and rural entrepreneurs. Cite data on membership (32 crore) and reach (20-25 crore families).
– **Agricultural Development**: Discuss the role of cooperatives in input supply (seeds, fertilisers), marketing (e.g., Amul for dairy), and processing (e.g., sugar cooperatives in Maharashtra).
– **Employment Generation**: Highlight the sector’s contribution to rural employment and livelihoods.
– **Limitations**: Critically analyse challenges such as over-indebtedness, lack of professional management, and regulatory bottlenecks.

3. **Recent Reforms and Modernisation (5 Marks)**
– **Digital Transformation**: Discuss the computerisation of 80,000 PACS (₹3,000 crore outlay) and the Sahkar Sarathi platform for rural cooperative banks.
– **Institutional Strengthening**: Explain the role of the Umbrella Organisation for UCBs and the establishment of the Cooperative University (‘Tribhuvan’) for skill development.
– **Policy Initiatives**: Mention the Multi-State Cooperative Societies (Amendment) Act, 2023, and the focus on multi-state cooperatives (e.g., 70,000 societies linked to national-level cooperatives).
– **Sectoral Expansion**: Highlight new initiatives like Sahakar Bharati, Bharat Taxi, and Sahakar Mitra to diversify cooperative activities.

4. **Conclusion and Way Forward (3 Marks)**
– Summarise the dual role of cooperatives as both economic entities and social institutions.
– Emphasise the need for further reforms, such as strengthening governance, enhancing transparency, and integrating cooperatives with mainstream financial systems.
– Conclude with a balanced view: cooperatives are indispensable for rural development but require systemic support to overcome structural challenges.

Source: PIB (Press Information Bureau)

Karnataka PCS (KPSC) — State PCS Practice

Prelims: Which of the following is NOT a function of the newly inaugurated ‘Shri Bireshwar Co-operative Credit Society Limited’ in Belagavi, Karnataka, as per its stated objectives?

1. Providing short-term and long-term agricultural loans to farmers in Belagavi district
2. Promoting digital banking services for rural and semi-urban areas
3. Regulating the prices of essential commodities in Karnataka
4. Facilitating cooperative-based financial inclusion for marginalized sections

Answer: Regulating the prices of essential commodities in Karnataka — Regulating prices of essential commodities is not a function of a cooperative credit society; it falls under the purview of government agencies or market regulators.

Mains: Discuss the significance of the ‘Shri Bireshwar Co-operative Credit Society Limited’ in Belagavi for Karnataka’s cooperative movement and rural financial inclusion. How can such initiatives contribute to the state’s economic development? (Answer in 250 words)

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