- What is NABARD?
- Regional Rural Banks
- What is Co-operative bank?
- National Bank for Agriculture and Rural Development (NABARD)
- It is the top development bank.
- It was established in ’82 by a special act of parliament: to provide cheap loan to villagers.
- Government of India holds 99% stake.
- It takes money from RBI, World Bank and other international funding institutes.
- It loans this money to Regional Rural banks and to NBFC (Non-Banking Finance Companies) working in Microfinance sector.
- Recall that Muthoot Finance is also an NBFC, but It cannot get money from NABARD. (although they may be giving gold-loans to villagers!)
- NABARD’s Headquarter = in Mumbai
- RBI Headquarter = in same Mumbai. (and NOT in Delhi)
Now two more types of Banks: Regional Rural Banks (RRB) and Cooperative Banks.
As the name suggests, they are located in rural / semi-urban areas.
They give loans, mostly to small and marginal farmers, agricultural laborers and rural artisans.
- They were established under Government ordinance in mid-1970s.
When parliament is not in session, President can make an act on advice of the cabinet.
Such law is called ordinance.
RRBs are jointly owned by
- Govt. of India,
- the concerned State Government and
- Sponsor Banks
- Ownership in the proportion of 50%, 15% and 35% respectively
- Dena Gujarat Gramin Bank
- Andhra Pradesh Grameena Vikas Bank
- Vidharbha Kshetriya Gramin Bank
- Paschim Banga Gramin Bank
- Same as Air-India and Kingfisher: Loss making.
- Out of political compulsions, they hold ‘Loan-melas’ to give ‘mass-loans’ to farmers (during Election-years) but later cannot recover the money.
- Sometimes loans given to undeserving people, due to political pressure.
- Makes sense huh? Government owns 99% in NABARD >> NABARD Gives money to RRBs, I hope you get the picture.
- RRBs are not functioning properly; they need new capital infusion of Rs 2,200 crore by 2011-12.
- Performance of RRBs should be monitored by state level committees headed by finance secretaries of state governments with officers from the NABARD, etc.
- (Better his report prepare it thoroughly for General Studies Mains.)
Coming to the second type of banks:
- Copy pasting from Rediff.com
- They’re small-sized units organized in the co-operative sector (mostly Rich-businessmen and relatives of politicians gather-up and open such banks in a city/ small town)
- These banks, until 1996, could only lend for non-agricultural purposes.
- Cooperative Banks in India are registered under the Co-operative Societies Act.
- These banks provide most services such as savings and current accounts, safe deposit lockers, loan or mortgages to private and business customers.
- Co-operative banks function on the basis of ‘no-profit no-loss’. Co-operative banks, as a principle, do not pursue the goal of profit maximization.
- Therefore, these banks do not focus on offering more than the basic banking services.
- Co-operative banks give cheaper auto loans compared to private banks.
- The criteria for getting a loan from a UCB are less stringent than for a loan from a commercial bank. For instance, when taking an education loan, it does not matter whether the course you are going for is recognized or not!
- End of copypasting rediff.com
- Step 1: Gang up a few heavy weight politically connected people, and Open a cooperative bank.
- Step 2: take deposits from common-men, borrow some money from RBI, but give loans only to your friends and relatives and don’t ask them to pay EMI.
- Step 3: Keep doing this, until the bank collapses.
- Step 4: Now pay bribe to police and run away to any foreign country.
- Some big scams: Madhupura Bank-Ketan Parekh, Aadarsh Bank, etc.