SPEECH BY HON'BLE PRESIDENT OF INDIA SMT. PRATIBHA DEVISINGH PATIL AT THE THE INAUGURAL SESSION OF THE 9TH ALL INDIA CONFERENCE OF URBAN COOPERATIVE BANKS AND CREDIT SOCIETIES

Siri Fort Auditorium, New Delhi, 26th November 2007

I am happy to be associated with the inauguration of the 9th All India Conference of Urban Cooperative Banks and Credit Societies, especially as I have been associated with the working of NAFCUB. The theme of the Conference "Financial Inclusion Through Urban Cooperative Credit Institutions" is topical and timely. I would like to pay homage to Sawai Singh Sisodia whose statue I just unveiled. He came on the scene when the cooperative movement was suffering a crisis. His passing away is a great loss to the movement.

The urban cooperative credit movement in India is a century old. There are over 20 million members of urban cooperative banks in India making it, in terms of membership, the largest cooperative system in the world. It is a vast sector comprising over 1,850 urban banks and around 40,000 credit societies. The reserves of urban cooperative banks aggregate to over Rs.1.1 lakh crore. Though the share of the cooperative banking sector in the entire banking system in India is about 5 percent, it is an important segment considering the number of consumers availing of its services.

Visualizing the importance of cooperatives in the development process, the first Prime Minister of India, Pandit Nehruji, said that he wanted to "convulse" the nation with cooperatives. He had an abiding faith in the cooperative system, the objective of which was to give small traders, artisans, factory workers and others access to institutional credit, instead of them going to the private moneylender and then often meeting with disastrous consequences. By catering to the credit requirements of people with limited means in the urban and semi-urban centers, the urban cooperatives seek the financial inclusion of people who are economically disadvantaged and this is extremely important for the equitable growth in the country.

In a fast globalizing world order and growing competition, the challenge is to has a strategy for the urban cooperative banks who have the resilience to adapt to new requirements. A small number of cooperatives have grown to be big entities and are in a position to meet competition, but a number of others need support for their survival.

The strength of the cooperative movement is in its collectivity. Cooperative institutions, particularly small urban cooperative banks and credit societies find it difficult to face competition from bigger players in the field, as the latter have at their command resources, technology and managerial competence, far greater than what cooperative banks have. For the individual banks and societies to be competitive, the sector as a whole must be strong and each unit should be backed by collective strength. The urban banks ought to seriously consider ways of networking amongst themselves and aggregating their resources as well as their requirements so that they have the advantage of size while approaching the financial markets and dealing with larger entities. Such systems and structures exist in many countries, where a single strong apex body is providing the expertise and resources for the grassroots level banks to operate. The possibility of this could be examined in the Indian context. It is equally important to make use of new management systems and technological advancements to modernize the urban cooperative sector. They may also consider mobile banking to reach out to their clientele.

The unprecedented growth of our economy, year on year for the last few years, is also bringing about huge demographical changes. Rapid urbanization through migration is now resulting in a significantly large section of the population in urban areas being financially excluded. To bring them under the institutional fold for their financial and banking requirements is a challenge but it is also a tremendous opportunity for the urban cooperative banks and credit societies. Organizational strengths such as committed leadership, efficient use of resources, transparency in operations and involvement of members are, however, pre-requisites for the cooperatives to be able to take advantage of the opportunities. Improvement in overall governance should strengthen cooperatives and equip them to become premier vehicles of financial inclusion.

The rate of growth of credit by cooperative banks is not keeping pace with the rate of growth of credit by the rest of the banking sector. The share of cooperative banks, both in the agricultural and in the urban sectors, appears to be progressively shrinking. This could, in the long run, have an adverse effect on credit to marginal farmers, artisans and weaker sections of society. It is, therefore, imperative that cooperative banks are strengthened to be in a position to take up financing for the less privileged sections of society. It will be equally important for the co-operative banking sector to set targets and work out innovative strategies to achieve them. The innovative strategies should essentially aim at improving the income levels of the beneficiaries, so that they do not fall into a debt trap.

The banking and the financial sector are essentially based on trust of the depositors and the public. The urban cooperative credit sector must look at all avenues of increasing this trust. Aberrations that may have crept up over a period of time need to be addressed at the earliest. The country has a stake in self-help economic entities like cooperatives.

Economic empowerment of women and involvement of youth is very essential for any meaningful growth. The financial sector in the post-reforms period in the country has been laying great emphasis on young financial professionals managing key posts in the sector. In fact, some of the highest paid professionals in the banking sector are young women. On the other hand, there is no such initiative in this direction by the cooperative banking movement. Youth, as experience has shown, is attracted to and motivated to work in those areas where there is challenge, dynamism, an enabling environment and returns which are commensurate with their efforts. Cooperative leaders will have to do some self-analysis as to whether they are sincerely making efforts to provide all this to the youth so as to attract them. Otherwise, there is a distinct possibility of young professionals ignoring the sector altogether in the days to come. Urban credit societies, along with agricultural societies, can become a significant base for providing a range of activities with the involvement of youth for the creation and equitable distribution of wealth.

Insofar as supporting efforts to improve the economic position and empowerment of women are concerned, there is no route that is better than that of cooperatives and Self Help Groups. Women Cooperative Banks are better acquainted with the situation and requirements of women. They can help channelise the capacities and talents of women and can become important instruments of economic betterment. Women Cooperative Banks, therefore, must be encouraged. Urban cooperative banks should also have special programmes for women. I would be very happy if the management of the movement considers increasing the representation of women on the Boards of cooperative banks and credit societies, to certain minimum levels through changes in their bye-laws, so that economic empowerment of women gets support at the grass-roots level.

I hope that this Conference will rejuvenate the spirit of the urban cooperative credit sector and that the Central Government and the Reserve Bank of India create a sense of confidence among the institutions to meet in whatever way possible the huge challenges ahead and also to make use of the opportunities that the resurgent Indian economy has to offer. With this, I inaugurate the 9th All India Conference of Urban Cooperative Banks and Credit Societies.

Thank you.

JAI HIND