The Maharashtra State Co-op. Bank Ltd., Mumbai

Brief History

The success of co-operative movement depends much less on the growth of the number of societies than on the moral basis of the shareholders.– Mahatma Gandhi

The co-operative movement in India traces its origin to a period as early as 1904, when the Co-operative Credit Societies Act was enacted. As far as co-operative sector is concerned, Maharashtra is the most developed state in the country. There is hardly any village in the state which remains untouched by the co-operative movement and hardly any important economic activity that is not covered under a co-operative fold. The co-operative movement in Maharashtra is nourished by a three-tier co-operative credit structure, at the helm of which is The Maharashtra State Co-operative Bank Limited (MSCB). At the middle level are 31 District Central Co-operative Banks (DCCBs) and at the bottom level, over 21269 Primary Agricultural Credit Societies (PACS) are functioning.

The MSC Bank serves as a balancing center for the surplus resources of co-operatives in the state and thereby ensures their multifaceted development and prosperity. Needless to say that MSC Bank is the biggest co-operative bank in the country. Besides, it is the only co-operative bank in India which has figured 9 times among the top 1000 banks in the world on the basis of financial soundness (Capital Adequacy) as surveyed by ‘The Banker’ published from London, periodically. The bank is listed in Schedule II of RBI Act 1934.

The network of the co-operative Credit structure in Maharashtra

Sr. No.	The Maharashtra State Co-op. Bank	2013-14	Co-operative Credit Structure (Maharashtra State)	2013-14
1	Head Office (Mumbai)	1	No. of DCC Banks	31
2	Administrative Office (Vashi)	1	No. of Branches of DCCBs	3711
3	Regional Offices	4	Total No. of PACS	21269
4	Pay Offices	2	Members of PACS	11141670
5	Divisional Offices	8	Borrower Members	4879198
6	Branches	43	No. of Urban Co-op. Banks	520
7	Extension Counters	3	No. of Branches of Urban Co-op. Banks	4426
8	CTS Service Centers	7	No. of Urban Co-op. Cr. Sty’s. (Mar 09)	26629

The twin objectives of MSCB is to promote and propagate the creation of a Co-operative Commonwealth through socio-economic transformation of the community by following co-operative principles by adopting democratic means. It means elimination of individual profit, distribution of surplus earnings according to the established law & regular practice and readiness to work for a common cause.

The business of this Bank shall be carried on and managed by elected Board of Directors. The maximum number of elected members of the Board shall not exceed twenty one. At least TWO directors on the Board of Directors of the Bank should meet the criteria of expert director mentioned in Bye-law 2(i). The Board meets as often as may be necessary, but at least once in two months and exercises overall control over the working of the Bank. From the Board of Directors, are constituted three sub-committees, viz. Loan Committee, Executive Committee and Staff Committee.

Loan Committee considers Loan proposals, requests for opening inland and foreign letters of credit, issuance of bank guarantees on behalf of co-operatives and other constituents.

Executive Committee considers issues like admission of members, allotment, transfer and redemption of shares of the Bank and other administrative and working operational matters.

Staff Committee decides matters exclusively related to staff, such as recruitment, appointments, promotions, training needs etc.

The first two committees meet alternatively once in a fortnight, while the staff committee is expected to meet quarterly. The General Body of Members meets once in a year. The day-to-day working of the Bank is supervised by the Managing Director with the help of senior colleagues.

Board of Administrators consisting of 2 members has been appointed by the State Government to carry on business of the Bank since 7th May 2011 in more professional way.

Over the years, MSCB has been fortunate in having the guidance of eminent personalities in different walks of life. To mention a few are successful businessmen like the late Mr. Lallubhai Samaldas, Mr. Vaikunthbhai Mehta, Mr. V. D. Thackersey and intellectuals like professor D. G. Karve, Dr. Dhananjayrao Gadgil and Mr. R. G. Saraiya who have helped the Bank to grow in stature and strength.

The Bank was originally registered as The Bombay Central Co- operative Bank Limited in 1911. However, it’s fore-runner The Bombay Urban Co- operative Credit Society was formed on 23-01-1906. With the passage of time, the Bank underwent a few constitutional changes before it acquired the present status, viz. The Maharashtra State Co-operative Bank Ltd. (Incorporating the Vidarbha Co-operative Bank Ltd.) on 1-5-1961 under the Registration No. 359 following the reorganization of states on the linguistic basis. It is interesting to note that as a result of constitutional changes, The Bombay Central Co-operative Bank Ltd. became known as The Bombay Provincial Co-operative Bank Ltd. in 1923, which from 1952 was recognised as The Bombay State Co-operative Bank Ltd.

Initially, the Bank laid emphasis on the establishment of live contacts with villagers, which gave impetus to the opening of branches in the state. The Bank’s credit and marketing activities were combined in its rural branches. However, in due course the Bank encouraged the formation of separate marketing societies and transferred the business to them. With the evolution of three-tier co-operative credit structure (PACS, DCCBs, MSCB), the Bank transferred its credit business to the newly established Central Financing Agencies, i.e. Districts Central Co-operative Banks. This paved the way for linking credit with marketing in the co-operative domain.

To widen the scope of co-operative activities, the bank has helped substantially in promoting not only new co-operative ventures, but also extended technical guidance and managerial expertise to them. Indeed, the Bank has a lion’s share in promoting the first co-operative sugar factory in the country at Pravara Nagar in Ahmednagar district. To promote its activities on a greater scale, the Bank constituted within itself a separate cell, viz. Co-operative Industries Commission, by drawing experts from various universities, technical institutes, industrial houses and consultancy organizations. The bank thus gave fill up to the organization of co-operative and ancillary industries for the production of agricultural inputs such as fertilizers, agricultural machinery like oil engines, pump sets, tractors, etc. The bank also helped to set-up secondary and tertiary industries manufacturing paper, alcohol and lately ethanol based on the by-products of the agro processing industries. Today, the Bank is helping sugar factories in setting up the co-generation projects.

These agro based processing units are financially helped by MSCB & some of these units have promoted and/or helped the localities to start up the professional educational institutes viz. Medical Colleges, Engineering Colleges etc. and spread the education which was dream in semi-urban & rural vicinities.

But this is not surprising given the social commitment of the bank since its inception. Accordingly, the bank has constituted a Credit Stabilization Fund to ably meet natural calamities and at the same time created a Special Credit Stabilization Fund for strengthening Fishery, Agro Co-operatives. The funds are used to rehabilitate poor farmers through PACS and DCCBs.

Another feature of the working of MSCB is the introduction of the Crop Loan System. It was evolved by MSCB jointly with some District Central Co-operative Banks in the state. Following its success, the scheme evoked wide-spread interest and similar experiments were launched in other districts of the state. Ultimately, the scheme was adopted by the Reserve Bank of India for its implementation throughout the country. The Bank thus proved to be a pioneer of the time-tested Crop Loan System.

Apart from this, the Bank took innovative measures to provide facility for issuance of Demand Drafts by devising the Mutual Arrangement Scheme way back in 1931. This scheme for co-operative banks in the state inspired National Federation of State Co-operative Banks (NAFSCOB) to introduce a similar scheme for co-operative banks in the entire country from the sixties. Obviously, the Bank had a lion’s share in its formulation.

There are 31 DCC Banks in the State, out of which 30 Districts Central Co-operative Banks in the state which primarily cater to the financial needs of the agricultural sector. In this endeavor of the District Banks, MSCB plays a pivotal role by providing refinance. The Bank also extends its services to DCCBs and Urban Banks for investments of their funds in government securities by opening Constituent Subsidiary General Ledger (CSGL) accounts. Bank has sanctioned Import/ Export limits to PCB’s / DCCBs on behalf of their customers and helping to promote their forex business. While lending, emphasis is laid on financing Integrated Rural Development Schemes presently known as “Suvarna Jayanti Gram Swarojgar Yojana” to spur multifaceted development of shareholder PACS who are below poverty line, as well as financing schemes of national importance like Bio-Gas Development etc. Thus, waste resources are put to the best use and thereby pollution is minimised. Those district banks which are not eligible for loans under NABARD’s refinance facilities are also provided financial assistance by the Bank out of it’s own resources at the concessional rate of interest. Another salient feature of the financial assistance extended by MSCB is that although it caters mainly to the needs of the agricultural sector, it takes care of financial needs of the non-farm sector also by providing refinance facility to district banks under NABARD’s general refinance and composite loan schemes to enable them to help rural artisans and small scale industries.

To accelerate the region wise growth of co-operative sector, MSCB opened its Regional, Divisional and Pay Offices. It was felt that this step would take the Bank closer to its customer spread over the state and enables it to serve them better. These offices arrange finance to DCCBs & other Co-operative Institutions and at the same time act as supervisors, closely monitoring Bank’s loans and advances.