WOCCU Meets with the Reserve Bank of India on Cooperative Banks' Reform

March 22, 2006

At the invitation of the Reserve Bank of India, Dave Grace, Senior Manager of Association Services, World Council of Credit Unions, Inc. (WOCCU) recently met with the Reserve Bank regarding potential reforms for the country's over 100 years old cooperative banking sector. In meeting with Deputy Governor, Ms Usha Thoroat of the Reserve Bank of India and her senior staff, Mr. Grace discussed governance and competitive pressures faced by financial cooperatives. The meeting was a continuation of an ongoing dialogue between the two organizations regarding appropriate prudential standards and regulatory structure for cooperative banks in India.

Hamstrung by not being granted with full regulatory power to remove officers/board and to force mergers/liquidations, the Reserve Bank of India is hesitant to allow the urban cooperative bank sector to expand and grow. These limitations include a current ban on opening any new branches of existing coop banks, chartering of new coop banks, high liquidity ratios (making profitability challenging) and existing of a second tier wholesale cooperative bank for the sector. This structure is in part the result of coop banks having only state (provincial) level legislation and registration, a federal law for coop banks does not exist.

Separated into urban cooperative banks that are more community based and rural cooperative banks that are more top-down driven with government involvement, together they serve over 330 million clients with a combined $27 billion in assets, giving India the largest financial cooperative sector in the world in terms of individuals served. While generally well capitalized, both the urban and rural cooperative banks are plagued with non-performing assets of 23 percent and 36 percent respectively.

During his trip Mr. Grace also met with representatives of several cooperative banks and federations of cooperative banks. He also visited the National Agriculture and Rural Development Bank, which has supervisory authority for the top two tiers of the rural cooperative banking sector.

World Council of Credit Unions is the global trade association and development agency for credit unions. World Council promotes the sustainable development of credit unions and other financial cooperatives around the world to empower people through access to high quality and affordable financial services. World Council advocates on behalf of the global credit union system before international organizations and works with national governments to improve legislation and regulation. Its technical assistance programs introduce new tools and technologies to strengthen credit unions' financial performance and increase their outreach.

World Council has implemented 300+ technical assistance programs in 89 countries. Worldwide, 68,882 credit unions in 109 countries serve 235 million people. Learn more about World Council's impact around the world at

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