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A Quarterly Magazine on Banking & Finance
OO
PERATIVE
e c n e d fi n Co gained Re s e v i t a r e p o o C in
Special Interview
Shri Babubhai Bokhiriya Minister of Agriculture & Cooperation, Gujarat
FULL COVERAGE
3rd February 2015, Mumbai
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April - June 2015 | VOLUME 01 | ISSUE 2 | US $10 | ` 75
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GUJARAT C
Special Issue
A Quarterly Magazine on Banking and Finance
Contents april - june 2015
volume 01 n  issue 02
08
28 Dr Kshatrapati Shivaji Chairman and Managing Director, Small Industries Development Bank of India (SIDBI)
30 Narendra S
Back in the Reckoning
Dabhi
Managing Director, Adarsh Cooperative Bank Ltd
face-to-face 34 Jitendra Pandya Director, Agricultural Produce Market Committee, Government of Gujarat
14 Babubhai
Bokhiria
Minister for Agriculture and Cooperation, Gujarat
38 Rahil Patel 16 A M Solanki Principal Secretary, Department of Agriculture & Cooperation, Government of Gujarat
Chief Information Officer, Kalupur Commercial Cooperative Bank
40 Shankarsinh R Rana
20 M D Chauhan Additional Registrar, Cooperation Department, Government of Gujarat
Managing Director, Madhur Dairy
44 S O Junare Director, National Institute of Cooperative Management (NICM)
24 Ghanshyam
Amin
Chairman, Cooperative Bank of India
special feature 22 N B Shaikh 26 Jyotindrabhai
Joint Registrar (Inspection), Commissioner of Cooperation and Registrar of Cooperative Societies, Gujarat State, Gandhinagar
Chairman, Gujarat Urban Cooperatives Bank Federation
36 R N Joshi
Mehta
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IAS (Retd.) and Chief Executive Officer of the Federation
digitallearning
editorial
One for All, All for One
I
t is difficult to imagine that foundation of the Reliance empire was laid by legendary Dhirubhai Ambani with the support of a cooperative bank. Unbelievable but true. The cooperative movement in India has proved a real boon for those without enough collateral to procure loan from large commercial banks. And, that was the objective behind espousing the cause of cooperatives in India.
Although the history of evolution of cooperatives in India can be traced back to the preIndependence days, it was post 1947 that there was a huge growth in the number of cooperative societies serving in the agriculture sector. Right from the stage of arranging money for purchasing seeds till selling their produce in the market, cooperative bodies have been playing an all-crucial role in the lives of small farmers. With the help of cooperative credit societies, they have also been able to free themselves from the clutches of coercive, traditional moneylenders. Starting apparently with the idea of using one’s own pooled money for own good, the cooperative culture has come a long way, indeed. Be it agriculture farming, dairy, poultry, sugar or banking sector, cooperative bodies seem all pervasive. But, having said so, there is no denying the truth that not all the states have been able to provide the ground fertile enough for the growth of cooperative bodies. States like Gujarat, Maharashtra and Punjab, among some others, have nurtured the culture over the years through suitable policies and the right kind of leadership. Of these, Gujarat acquires a prominent place, as it has made some rare achievements. The rare success achieved by the milk products giant Amul (Anand Milk Producers Union Ltd) proves the power of cooperatives. The State has also achieved significant success in the field of urban cooperative banking with nearly 226 of them in operation and many of them having deposits in excess of `70-80 crore.
Recognising the strides made by the State of Gujarat in the field of cooperatives, Elets Technomedia, in collaboration with the Department of Agriculture & Cooperation, Government of Gujarat, is organising “Elets Gujarat Cooperatives Summit 2015� on 22nd June in Gandhinagar. The event will have participation by the top officials of the Centre and state governments, industry and other stakeholders in the cooperative space. It will also bring together key representatives from across the cooperatives of Agriculture, Dairy and Banks. Apart from highlighting the achievements of the State, the Summit will also serve as a unique platform to interact and ponder over the concerns and challenges facing the sector, so as to come up with pragmatic, lasting solutions to the ticklish issues in Gujarat as also elsewhere. It will also focus on the development of cooperatives and the role of ICT therein. Hope you join the forum for a mutually enlightening experience. Happy reading!
ravi guptA Ravi.Gupta@elets.in
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A Quarterly Magazine on Banking and Finance
april - june 2015 volume 01 n issue 02
PRESIDENT: Dr M P Narayanan EDITOR-IN-CHIEF: Dr Ravi Gupta
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Apro/Ab/2015/05/28/JCB
Dt. 28-05-2015
MESSAGE Challenges in life come in three broad categories- easy, difficult and impossible. Those who take on only easy, have a safe and boring life. Those who take on difficult, have a tough but satisfactory life. And those who take the impossible are always remembered. It gives me pleasure to know that the Agriculture and Co-operation Department (Government of Gujarat), in association with Elets Technomedia Pvt. Ltd., is going to organise Gujarat Cooperatives Summit on 22nd June, 2015, at Mahatma Mandir, Gandhinagar. I hope that the Summit will provide an opportunity to all the participants to ponder on the issues and come up with ideas out of the box that will lead to seminal transformation in the area of Co-operative Movement. An exhibition is also arranged, giving an opportunity to understand the success of innovative initiatives, especially in cooperative sector. I extend my best wishes for the success of this Summit and welcome all the participants on the land of Gandhinagar. With best compliments
(Anandiben Patel)
Cooperatives
cover story
Back in the Reckoning
The Cooperative Movement in India has led to the growth of a large number of cooperative bodies, though not all of those met with success. But Gujarat stands out as a state that created an atmosphere conducive to the growth of cooperatives in sectors like dairy, banking, agricultural farming, etc. Sneha Mejari of Elets News Network (ENN) tries to find out whether Gujarat is ‘Proudly Cooperative’ today
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Cooperatives
cover story
A
fter passing through a low phase, the cooperatives in Gujarat are slowly regaining the trust of their people. If the rising deposits in various cooperative banks are anything to go by, the people of Gujarat are ready to forget the scams and controversies and to move ahead with the movement. But, with the Reserve Bank of India (RBI) spelling out new financial policies, the question arises: are cooperative banks ready to compete with commercial banks? Also, will slower adoption of new-age technology prove to be a hurdle for the cooperatives in Gujarat? “Sardar Vallabhbhai Patel once came to his village Karapsar in Kheda district. The farmers of the village went to him and said that they did not have good means of living and they didn’t have work as monsoon had caused problems for them, and sought his suggestion. Patel responded by just saying two words, ‘Mandali Karo’, which means ‘form a cooperative’.” This was the example given by Jyotindrabhai Mehta, Chairman, Gujarat Urban Cooperative Banks Federation (GUCBF). There is no denying the fact that the cooperative movement in Gujarat has played a very important role in the development of the State. The story of AMUL (Anand Milk Producers Union Ltd) can serve as the best example in this context. Formed in 1946, marking the
beginning of the dairy cooperative movement in India, AMUL not only turned the fate of crores of dairy farmers for better, but also became irreplaceable ‘Taste of India’. With Narendra Modi’s recent visit to Mangolia, AMUL is also about to tuning the Taste of Mangolia, proving that sky is the limit. The Gujarat Co-operative Societies Act 1961 proved to be a game changer in the cooperative history of Gujarat. It brought with itself a wide scope of development for farmers, first by helping them get loans for agricultural purposes at a very low rate of interest from the cooperative banks and secondly by way of formation of federations like AMUL, which helped the farmers get better prices for their products.
Story so far Today in Gujarat, there are 62,343 cooperative societies registered under the Gujarat Cooperative Societies Act, 1961, which boasts of more than 1.25 crore membership. Thus, on an average, every fifth person in the State is member of a cooperative body. However, Gujarat is better known for its milk cooperative societies on Amul pattern. In Gujarat, there are 13 District Milk Unions and 12,402 Primary Milk Cooperatives, and milk procurement is an average 6.7 million kilogram per day. The ‘White Revolution’ has had a big impact on the rural economy.
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Cooperatives
cover story have earned the reputation of being known for quality and value. Today, Amul leads the pack as the largest cooperative milk and milk products brands. Some other food cooperative brands include Vijaya (Andhra Pradesh), Verka (Punjab), Saras (Rajasthan), Nandini (Karnataka), Milma (Kerala) etc. Each of these brands has become market leader in its own state or traditional area of operation and gradually expanding its presence in other states. The success of Amul proves that cooperatives can successfully compete with even multinational companies.
Motherland of UCBs The State of Gujarat is also known as the ‘Motherland of Urban Cooperative Banks’, as the concept of the urban cooperative banks (UCBs) is said to have seen the light of the day here following establishment of the ‘Anyonya Sahakari Mandali’, in the then princely state of Baroda in 1889 under the guidance of Vithal Laxman, popularly known as Bhausaheb Kavthekar. The first registered UCB, the Surat People‘s Cooperative Bank Ltd, was established in Surat city of Gujarat in March 1922. The success of this bank gave a boost to the formation of UCBs across Gujarat. But at the same time, the development of the UCBs also marked regional imbalSimilarly, the three-tier cooperative credit structure ance in Gujarat, as out of the 351 UCBs, about 195 are has helped the farmers get agricultural credit. There are 7,943 Primary Agricultural Credit Co–operative Societies located in four districts and 92 in five districts, while only functioning in the rural areas of the State. Till 2008–09, 64 UCBs are located in remaining districts. The districts 11,82,759 Kisan Credit Cards were issued to the farmwhere most of the UCBs are located are Ahmedabad, Kheda, Baroda, Mehsana, Surat and Panchmahal. ers to provide credit facility through district cooperative After the Independence of the country, at the recombanks. Total finance for agriculture through cooperative sector is more than `3,500 crore. mendations of the A D Gorwala Committee (1954), one central cooperative The State of Gujarat is also known as the bank for each district became ‘Motherland of Urban Cooperative Banks’, a dictum, paras the concept of UCBs is said to have seen ticularly in the the light of the day following establishment of bigger states, with a view to ‘Anyonya Sahakari Mandali’ in 1889 provide stability and facilitate emergence of a strong and powerful cooperative credit ‘White Revolution’ structure for the development of all cooperative activities Operation Flood (OF) was a unique programme introduced at the district level. The establishment of District Central by the Government of India in 1970s. It was not only for Cooperative Banks (DCCBs) was meant to serve as a the dairy farmers to ensure controlling their resources link between the ultimate credit disbursing outlets, viz., they created, but also to direct their own development. An Primary Agricultural Credit Societies (PACS) at the base investment of `20 billion over 20 years under the Operalevel, DCCB at the intermediate level and the State tion Flood Programme in 1970s and 1980s had contributed Cooperative Banks (SCB) at the apex level. to tripling of milk production from about 20 MMT (million Today, the Gujarat State Cooperative Bank, the apex metric tonnes) in the pre-Operation Flood period to more bank in the State, has not only emerged as the most sucthan 60 MMT at the end of the programme. The one State to benefit the most from the processful bank, but has also done a great work in leading the way for district cooperative banks as well as urban gramme is Gujarat, where cooperative brands like Amul
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Cooperatives
cover story cooperative banks. Gujarat is the secondlargest state with regard to the success of cooperative banking after Maharashtra. In all, there are 260 urban cooperative banks in the State, having 621 branches and 26.09 lacs membership. The total deposits of the banks amount to `16,156 crore and advances are `10,436 crore. After the downfall of some of the UCBs, the State Government made stringent provisions in the Gujarat State Cooperatives Act, 1961 for regulation of UCBs and an MoU was also signed for constitution of the Task Force for Urban Cooperative Banks (TAFCUB) with the RBI. Subsequently, as a result of positive actions, 22 weak Banks were merged with stronger banks.
Madhavpura scam However, the cooperative banking sector in the State also saw a dark phase in the form of Madhavpura Mercantile Cooperative Bank scam. The Credit-Deposit Ratio (CD ratio) of urban cooperative banks slipped due to the lack of proper planning and management of the assets and liabilities of the banks. The Madhavpura bank was liquidated and lots of other banks, affected in the aftermath of the scam, have now been merged with bigger banks to revive them. Thankfully, the various steps taken by the government have regained the confidence of the masses. Increase in deposits after Madhavpura scam shows the positive attitude of the people towards cooperative banks. Now, a new challenge facing these banks is digitisation of banking services. However, the Gujarat Urban Banking Federation, along with institutions like NCPI and IDRBT, are trying to bring in technology by establishing CDRB centres, through which banks will be provided with the funding and infrastructure required to bring in CBS solutions and adopt technologies. These technologies are largely believed to emerge as the answer for lack in professional administration in cooperative banks.
Emergence of APMCs The regulation of agriculture markets in Gujarat was first started in the year 1935 during the regime of princely state of Baroda. The then Baroda State had established regulated mar-
Verghese Kurien - Father of the White Revolution
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Cooperatives
cover story
kets at Bodeli in the year 1937-38. Thereafter, the Bombay State Government established the Bombay Agricultural Produce Market Act 1939. In Saurashtra region, the regulation was introduced after the formation of Saurashtra Union and the legislation in this regard was enacted in the year 1954-55. With the bifurcation of bigger bilingual Bombay State and the formation of Gujarat, different laws were unified and the Gujarat Agricultural Produce Markets Act was enacted in 1963. Subsequently, in 1985, the Gujarat State Agricultural Marketing Board was established. Further, with a view to fetching to the farmers the right price for their produce, the Agriculture Produce Market Committees (APMCs) were set up. These APMCs are regulated through the Gujarat APMC Act 1964. There are 207 APMCs and agricultural products approximately worth Rs 16,989.97 crore are sold through these Committees per annum. It is the policy of the State Government to have one APMC in each Taluka in the State. The State Government has amended the APMC Act on
commission agents and other market functionaries, such as brokers, carting agents, weigh men, etc. are selected by the market committees under the by-laws subject to the minimum and maximum prescribed by the Gujarat Agricultural Produce Market Rules, 1965. The Market Committees collect fees on agricultural produce bought or sold in the Market area on ad valorem basis subject to a minimum of 30 paise and maximum of `2 per `100 worth sale, as provided in the Gujarat APMC Act, 1964. In case of cattle, minimum and maximum rates are `0.25 and `4 per animal. The main With a view to fetching to the farmers the source of income of the right price for their produce, the Agriculture Market Committee is Produce Market Committees (APMCs) were licence fee and market fee (cess). set up. These APMCs are regulated through APMCs in Gujarat the Gujarat APMC Act 1964 are autonomous bodies, consisting of eight representatives of the agriculturists, four representhe lines of a model act. Now, the focus is on e–market, tatives of the traders holding general licence, two repreprivate markets, contract farming, etc. sentatives of the cooperative marketing societies holding The Gujarat State Agriculture Marketing Board takes general licence situated in the market area, one nominee care of APMCs and helps them create infrastructural of local authority and two nominees of the State Governfacilities through various Central and State schemes like ment, who are officials. The duty of the market committee TMC, Infrastructure Schemes, RKVY etc. Every year is to maintain and manage the market, to prevent adulthe State Government allocates `26 crore for the modteration, to promote grading and standardisation and to ernisation of APMCs, of which 50 per cent are allocated enforce the provisions of the Act, rules, by-laws and the for tribal areas and 25 per cent for normal areas of the conditions of the licences under the Act in the market area. State under the Kisan Kalpvruksh Scheme. In Gujarat, cooperative societies and APMCs are also working for Since a farmer can understand the problems of farmsocial causes like charitable activities related to health, ers better, the State Government recently amended the education etc. Agricultural Produce Market Act and made some drastic changes to it, providing that only a farmer become At present, Gujarat has 210 APMCs having 199 main Chairman of an APMC. APMC has to take decision on market yards and 201 sub-market yards. The working area of an APMC generally comprises a Taluka, covering vilissue of licence within 90 days, market committee also shall allow to trade of non-regulated commodities and lages within 10-15 km radius of the market yard. On market APMC may collect user charges for providing facilities. premises, all the produce (notified commodities) are required There is a provision for no-confidence motion. to be brought and sold there only. Licence fees for traders, april - June 2015 | bfsi.eletsonline.com | BFSI
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Special Interview
Babubhai Bokhiria
As technology makes its way into every sphere of life, the Department of Agriculture and Cooperation has also embraced technology, to make the life easier for farmers. Babubhai Bokhiria, Minister for Agriculture and Cooperation, Gujarat, in conversation with Sneha Mejari of Elets News Network (ENN), talks about how technology is impacting the traditional agriculture
Technology
Changing
Lot of Farmers 14/BFSI | bfsi.eletsonline.com | APRIL - JUNE 2015
Special Interview
Babubhai Bokhiria
As a Cabinet Minister for Agriculture and Cooperation, what initiatives have you undertaken for the growth of the sector? The State Government of Gujarat has a complete agriculture-oriented approach. We have launched various schemes and announced several programmes which help farmers as well as the cooperative sector to grow. I would be proud to say that because of the support provided by the State Government, the farmers have started experimenting with new techniques and the cooperatives have started adopting technology. The budgetary allocation of `25 crore for the purpose in 2014-15 has been increased to `70 crore during the year 2015-16.
Elaborate on the schemes launched by the government in the agriculture sector. Under the guidance of Hon'ble Chief Minister, Smt Anandiben Patel, propounding the cause of a progressive Gujarat, in a short span of four months, this Government has extended various benefits of more than `4,000 crore to the farmers. The relief package of `1,100 crore to the farmers is one of the largest given away so far.
Under the guidance of Hon'ble Chief Minister Smt Anandiben Patel, in a short span of four months, this Government has extended various benefits of over `4,000 crore to the farmers. The relief package of `1,100 crore to the farmers is one of the largest given away so far
We want the farmers to get reasonable and viable rates for farm produce, for which, in the current financial year, Rs 10 crore under the Agro Industrial Policy, `25 crore under the National Food Processing Mission and `2.52 crore under the Family Biogas Plant scheme have been announced by the State Government. Apart from this, the Seeds Corporation Ltd has implemented a godown construction scheme, for which `105 crore has been provided and an amount of `254.68 crore has been allocated for land and water conservation projects. In order to support implementation of new farming techniques and help farmers buy new tractors, several schemes have been introduced by the government. Besides, plans like farmer accident policy, steps to minimise the risks involved in agriculture and organic farming policy have already been introduced to encourage the farming community here.
How do you plan to bridge the gap between the financial constraints of the people and the banks? Farmers had taken short-term agricultural loans from different banks and the interest is still due to the banks. So, the State Government has decided to pay 50 per cent amount of the interest directly to the banks in order to provide relief to the farmers. This year, over `2,929.08 crore has been allocated to the agriculture sector. Financial institutions have to consider the state-level rates of interest for loans sanctioned on production during the year 2014-15, as fixed by a state-level committee. Where the rates of interest on loan for unlisted items of production are not available, the ones fixed by the state level committee shall have to be considered. If the amount of loan exceeds the percentage of loan allowable, the sanctioned percentage of loan shall be taken into consideration and interest relief calculated thereupon. ď Ž APRIL - JUNE 2015 | bfsi.eletsonline.com | BFSI
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Regulator
A M Solanki
A M Solanki, Principal Secretary, Department of Agriculture & Cooperation, Government of Gujarat, in an interaction with Elets News Network (ENN) speaks of the priorities of his Department vis-Ă -vis welfare of the farming community and smooth running of the cooperative bodies in the State
Dedicated to the
Cause of Farmers 16/BFSI | bfsi.eletsonline.com | APRIL - JUNE 2015
As the Principal Secretary, what aims and objectives have you set for the Department of Agriculture & Cooperation? The key objective of the Agriculture Department is to meet the food demand of the State and increase the income of farmers by increasing agricultural productivity through imparting the knowledge of scientific methods of agriculture to the farmers and by implementing various schemes with their participation and help. The main objective of the administration is to ensure the economic and social upliftment of the people at large, promote the habit of saving on cooperative base, reach the facility of loans to the various sections of the society through cooperative institutions, and to make available reasonable and just price for the agricultural produce and facilities of storage to the farmers using the Agricultural Produce Market Committees (APMCs).
Regulator
A M Solanki
Give us an insight into the functioning of the Cooperative Department in the State of Gujarat. The passage of the Gujarat Cooperative Societies Act, 1961 led to the creation of the Cooperation Department of the State. The major functions of the Department are development and regulation of the cooperative societies in the State as well as implementation of this Act. Besides, it also works for the development and regulation of the Agricultural Produce Market Committees (APMCs) of the State, in line with the Agricultural Produce Market Committees Act, 1963. It also plays a major role in the auditing of cooperative societies. For the purpose of auditing of all the cooperative societies in the State, the offices of Joint Registrar, Cooperative Societies, Audit (Divisional), are operational at the Divisional level in Ahmedabad, Vadodara and Rajkot. The audit structure at the district level is at the disposal of
resources. It is necessary to formulate a strategy to enable farmers to compete in the international market and to immunise them against the sharp price fluctuations because of the elimination of quantitative restrictions on imports on the basis of the World Trade Organisation (WTO) norms on agriculture. This will result into diversification in agriculture, improvement in quality and value addition, so that benefits of the available opportunities could be taken. The role of agriculture in economic development has always been recognised. Even though, it is necessary to focus on agriculture in the same way as stress was given to the industrial sector in the decades of 1970s and 1980s. In other words, the entire developmental efforts should be centred around agriculture and agriculture-related activities.
What are the concerns of the State Government for the farming community?
The major functions of the Department of Agriculture & Cooperation are development and regulation of the cooperative societies in the State as well as implementation of the Gujarat Cooperative Societies Act the District Registrar, Cooperative Societies, who conducts auditing of accounts of the cooperative societies of various nature in the State. For the purpose of auditing of the accounts of the milk producers’ cooperative societies and milk producers’ cooperative federations, the Cooperation Department has constituted a separate Inspection and Audit Committee, headed by a Chief Executive Officer.
What, according to you, is the future of agriculture sector in Gujarat? In the coming years, there will be huge impact of the agriculture sector on overall economic growth on account of path-breaking developments in the field of technology and biotechnology. Following the emergence of these changes, most of the people will benefit on account of immense possibilities of earning wealth and grow using the existing
Concern for the farming community is a broad concept. Cooperative societies can be expected to look after their members and work for their welfare. Section 4 of the Gujarat Cooperative Societies Act, 1961 provides that a cooperative society can have promotion of the economic causes of the public as one of their objectives. Therefore, some provisions in the by-laws can be made for this purpose, which should not be contrary to other provisions of the GCS Act, 1931. Section 67(2), read with Section 70, provides for utilisation of part of the reserve funds for public purposes or charitable purposes, though with certain restrictions provided therein. These provisions are only enabling provisions and the discretion is always vested in the society. Concern for community is also expressed in Section 115 of the GCS Act, 1961 to allow surplus assets after the winding up proceedings are over for public purposes or charitable purposes, with procedures and restrictions provided therein. So far as the public distribution system is concerned, the cooperatives can render the services at the grass root levels; distribution of food grains, sugar, kerosene and other essential commodities are being done by the cooperative societies in both rural and urban areas. ď Ž APRIL - JUNE 2015 | bfsi.eletsonline.com | BFSI
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4th Annual
SUMMIT RAJASTHAN CONFERENCE & EXPO
AH M G NIN EA R dig ita lL
3rd
KNOWLEDGE
EXCHANGE, GOA Higher Education
2016
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2015
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6th Annual
OOPERAT
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ARAS HTR
May 2015, Jaipur
Mona Khandhar Secretary, Department of Agriculture & Cooperation, Government of Gujarat
MESSAGE The cooperative movement in India has been a major contributor to rural development, which was a major concern post Independence. The movement has also contributed in a big way to women empowerment and financial inclusion. Sugar industry, textiles, poultry, milk, and agro-processing and marketing, among others, have been various areas where cooperatives have grown and also brought fair price to the farmers as well as made the availability of loans for agricultural and other related activities easier. The cooperatives have promoted the habit of thrift and self-help among the ruralites. They have come forward to acquaint the villagers with the banking practices. Today, they are well aware of the advantages of keeping money in a bank instead of stacking it inside the house. Further, a part of the hoarded wealth has also begun to be used for productive purposes through banks. When we look at the aim with which the cooperative movement was started, we feel that the vision set during that time and proper implementation of cooperative movement can do wonders for a country like India. The movement was primarily aimed at providing easy credit to the poor farmers. In other words, the cooperatives were constituted as a forum of the poor peasants, who contribute their share for their own development. Another objective of initiating the cooperative bodies was to bring the role of traditional moneylenders to an end. In fact, the place of moneylender had to be taken by the cooperatives. But, if it happens the other way round, the latter is doomed. However, while various such aims seem to have been achieved by the cooperative movement, there also have been cases of slackness in the working of some of these societies. This slackness can be attributed to several factors, but lack of an appropriate incentive system is one of the key reasons for it. Another key reason for not being able to achieve the desired results out of the cooperative movement is lack of funds. The cooperatives have resource constraints as their owned funds hardly make a sizeable portfolio of the working capital. With weak fund base, borrowings from the central financing agencies are considerably conditioned. This has stood in the way of adequately meeting the credit requirements of the existing as well as new members. Also, if the farmers are not able to repay the loan, the crisis of funds can easily arise. The cooperative movement also has a history of viewing the problem of agricultural credit from the viewpoint of ‘supply’. The ‘demand’ aspect has often been neglected. Another major problem of co-operative credit is ever-rising overdue, as the performance on the recovery side has been dismal. Non-repayments in the range of 27 to 50 per cent have been reported in respect of the Cooperative Credit Societies. Overdues also exist with regard to Central Cooperative Banks and Land Development Banks. Obviously, the high level of overdues hinders the process of recycling of credit. After the announcement of new economic policy, the cooperative institutions are put in a place where they will have to directly compete with the commercial and national level banks with the limited resource that they possess. Another big challenge awaiting the cooperative sector is the upcoming technological advancement. Even if the institutions decide to break the traditional approach and go ahead with the technology, all the technological upgradation and hardware will cost a lot of money, which can be a burden on the cooperatives. All the above-mentioned problems need to be fixed and a good amount of attention needs to be paid. The State Government aims to come together with various stakeholders like banks, APMCs, Sugar cooperatives, Dairy cooperatives and the regulator RBI to discuss the issues and find a solution to them. To achieve this aim, the Department of Agriculture & Cooperation, Government of Gujarat, welcomes all the stakeholders to the ‘Gujarat Cooperative Summit’ on 22nd June at Mahatma Mandir, Gandhinagar.
Dairy
M D Chauhan
Cooperatives Herald
White Revolution Dairy has been one sector where cooperatives have seen an unprecedented success in the State of Gujarat. Going a step further, these cooperatives now plan to adopt new technologies to increase the dairy output. MD Chauhan, Additional Registrar, Cooperation Department, Government of Gujarat, in conversation with Nirav Soni of Elets News Network (ENN) throws more light on the progressive cooperative dairy sector of the State
What role has been played by the cooperative sector in the past and how is it going to impact the future of Gujarat? Cooperatives have always helped people collectively as well as individually with various tools and resources. In Gujarat, the cooperative movement has been successful in dairy, cotton, sugar, oilseed, banking, fisheries, housing etc. Making a humble beginning, the cooperatives have become very large operators, changing the life of small producers/ people in each sector. Gujarat is the pioneer in cooperative sector, particularly dairy cooperatives. Efforts are being made to encourage cooperatives in other sectors like horticulture etc. They are also going to play a very crucial role in improving the livelihood for rural poor in Gujarat.
What role, do you think, is being played by the cooperative banks in Gujarat towards achieving Financial Inclusion? Cooperative banks have played an important role in the growth of the State. They went on to achieve success, as members/consumers financed the institution and were involved in its decision-making process. Within
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Dairy
M D Chauhan small communities, relatively intimate knowledge of each other’s credit and trust worthiness ensured that loans are provided to only those borrowers who would be able to repay them. The members had to monitor each other, and relatively small and homogeneous membership base of early cooperatives ensured that peer pressure provided incentives to the borrowers to repay. Beyond financial incentives, social relations among members were also a contributing factor in the success of cooperatives. Due to their deep penetration at the grass roots level, the cooperative banks have been playing a major role in promoting financial inclusion.
How do dairy cooperatives contribute towards making the cooperative movement a success? Before the cooperative movement began, the dairy industry in the Kaira district was being exploited by middlemen, who supplied milk to the consumers. It began as a response to this exploitation and put an end to it. It grew because it responded to the farmers financially as well as with services, and it has thrived ever since because they are owned by farmers, who have a stake in its success. Further, it has been managed by capable professionals and strengthened by dedicated scientists, technologists and workers. Further, it is worthwhile to note that from a humble beginning, the state's dairy cooperative programme has grown into one of the largest in the world and is owned by millions of rural producers as the members. It is all the more impressive that it has been accomplished with minimum government intervention. In Gujarat, there are 16 major dairy plants. Besides creating employment opportunities in urban areas and giving boost to marketing, transport and distribution, these dairy cooperatives have also helped farmers provide a sustainable rural employment programme. A majority of the cooperative members are landless, and are marginal or small farmers who contribute their produce of milk to the cooperatives. For these contributors, the income derived from milk provided their only regular cash flow, thus, transforming dairying into an economic activity.
How is the Registrar of Cooperative Societies (RCS) playing its role for strengthening the cooperative sector in Gujarat? The State patronage and support for development of cooperative organisations has been the policy. RCS plays a very crucial role in registration, management (including elections of the committee), training and audit of cooperatives.
What various new technological tools should be adopted, especially by the dairy sector, for achieving better business growth?
The biggest problem in the dairy sector is low productivity per animal. To increase the productivity and quality of milk, better quality frozen semen with tested bulls, along with better feeding practices are required. This will also bring in all dairy farmers into the cooperative fold.
Any message you would like to give to the public at large? Professionally run cooperative sector can improve the
The State's dairy cooperative programme has grown into one of the largest in the world and is owned by millions of rural producers as the members economic condition of the small producers through development of value chain linkages - credit, technology and markets. The institutions like Gujarat Cooperative Milk Marketing Federation Ltd can compete with the best in the world and share the gains with the small producers.
What is your vision for the cooperative sector in Gujarat? I would like to see creation and successful operation of farmers’ cooperatives in horticulture sector, so that the farmers could get better prices and high wastages of about 30 to 40 per cent could be avoided through integrated value chain of cooperatives at various levels. ď Ž APRIL - JUNE 2015 | bfsi.eletsonline.com | BFSI
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Cooperatives
special feature
Confidence Regained Having seen a bad patch following a major scam, the cooperative banks have once again regained the past glory, thanks to the right decisions and corrective measures taken by both the State Government and RBI. N B Shaikh, Joint Registrar (Inspection), Commissioner of Cooperation and Registrar of Cooperative Societies, Gujarat State, Gandhinagar, analyses the causes and effects
T
he urban cooperative banks (UCBs) have played very significant role in the economic development of the people of Gujarat State. The working of the cooperative banks is different from that of commercial banks. The urban cooperative banks have extended their full support to the socio-economic growth of small-time traders, artisans and labour class of the society. Thus, UCBs have made a noteworthy contribution towards the removal of poverty of the nation as a whole. The infamous Madhavpura Mercantile Cooperative Bank scam of 2001 came as a major jolt to the cooperative banking industry in the State of Gujarat. Total deposits with UCBs in Gujarat dipped by over `3,000 crore within a few years from the day scam surfaced. Six banks got into a troubled situation and weakened. Over a period of time, situation further worsened and the number of banks going for liquidation increased to 82 by the year 2012. To regain the lost confidence and to improve working system of cooperative banks, a number of steps were taken by the Government of Gujarat. A new Chapter 10B was added to the Gujarat Cooperative Societies Act 1961, and stringent norms were prescribed with reference to punish-
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ment in case of any misdeeds, and restrictions were imposed on the term for holding the office of a bank. This resulted in increasing the transparency in working of the cooperative banks. For having a proper audit of the cooperative banks with more than `50 crore deposit, a quarterly audit by Chartered Accountants from a panel was introduced. To have better recovery of the dues, powers were vested in the hands of the cooperative banks under Section- 159 of the Gujarat Cooperative Societies Act 1961. Cooperative banks were also vested with the power on the lines of nationalised banks for better recovery under the Securitisation Act.
Role of Cooperative Banks l Encourage savings amongst public l To fulfil small financial requirements of
people l To provide notable and proper banking
services TAFCUB formation An MoU was signed between the RBI and the Government of Gujarat in June 2005, and the Task Force on Urban Cooperative Banks (TAFCUB) was formed the next month. A meeting of TAFCUB is held once every three months. As a result of which, the licences to 22 unlicensed cooperative banks were issued and 39 weak cooperative banks have been merged with financially strong cooperative banks of the State or with multi-state cooperative banks. As a result of creation of TAFCUB, the total numbers of weaker banks got reduced to 10 per cent in 2014, which was around 43.02 per cent of the total in 2005.
Cooperatives
special feature
Status of Urban Cooperative Banks (till 31.03.2014) Total Banks Multi-state Cooperative Banks Scheduled Cooperative Banks Women Empowered Banks Total Deposits Total Advances Liquidated Banks Merged Banks Total Members Total Depositors Following the merger of 39 weak banks, the financial condition of rest of the banks has improved. In the regular meetings of TAFCUB, discussions take place on the future of the banks affected by the Madhavpura Bank scam. During the scam, there were some 203 banks out of a total of 296 banks connected in some or the other way with the Madhavpura Bank. The net worth of some 29 banks was negative, which were not even involved with the Madhavpura Scam. Also, there were some 32 banks, whose net worth was positive, but were about to turn negative under the effect of the scam. After looking at the observations of RBI and several rounds of discussions by TAFCUB, it was required to have continuous monitoring of the banks affected due to the scam. Therefore, weaker banks, along with the stronger ones, were put under continuous monitoring at state level, and a series of discussions were held to form a model of merger of weaker banks with the stronger banks. And, as a result, some 39 weaker banks were merged with stronger ones. As on 30.03.2003, there were 351 cooperative banks
Organisational Structure of TAFCUB l Regional Director of RBI is the Chairman
l l l l
and Registrar of Cooperative Societies is the Co-Chairman Representatives from the Government are on the board Chief General Manager is from the central office of RBI There are representatives from NAFCUB, and A representative from the State’s urban cooperative banks federation
226 05 07 10 `31,285.00 crore `15,952.00 crore 82 39 27.88 lakh 91.38 lakh and 762 branches in operation. Total deposit stood at `16,506 crore and advances `11,004 crore. Total members were 32.05 lacs and the number of depositors was 1.09 crore. But, due to the Madhavpura scam, total deposit of these banks was reduced to `14,804 crore and advances down to `9,198 crore, which was further reduced to `8,420 crore in 2006. But, after the intervention and corrective steps taken by the State Government as well as RBI, the total deposits as on 31.03.2014 increased to `31,285 crore and advances to `15,952 crore. The number of members also went up to 27.88 lakh and that of depositors went up to 91.38 lakh.
Role of DICGC At this stage, the role of Deposit Insurance Credit Guarantee Corporation (DICGC) was equally significant, as it sanctioned insurance claims of depositors of liquidated banks up to `1 lakh within the shortest possible time. The Corporation acted as a trouble shooter to solve the issue of the hard earned money of small depositors, whose money was at stake due to cancellation of licences of such banks and were recommended for liquidation. The Corporation provided strength and support to the cooperative banking sector, which has regained the confidence of public in these banks. The cooperative banks are today contributing significantly to the economic growth of Gujarat. The new provision of inspection has been added under Section-84(8) to the Gujarat Cooperative Societies Act 1961, whereby inspection of UCB is conducted. Of course, all the UCBs are not being covered due to shortage of manpower, but it helps keep the Board of Directors of these banks awake. Now, one expects the leadership of these banks to take appropriate decisions in the interests of their members, and act as per the norms defined by the State Government and the directives of RBI, and contribute to the economic growth of the State by adopting new technological tools in this competitive age. ď Ž april - June 2015 | bfsi.eletsonline.com | BFSI
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Banking
Ghanshyam Amin
Cooperative Sector
Shines Bright Cooperatives are about dedicated leadership; the states which were able to provide that today boast of a thriving cooperative sector. Ghanshyam Amin, Chairman, Cooperative Bank of India, tells Elets News Network (ENN) how cooperative banks make effective use of money of the people for their own welfare How do you think cooperatives benefit economy? The cooperative movement in India has been one of the largest such movements in the world. We have six lakh cooperative institutions and 52 crore people, who are members of cooperatives across India. In this context, milk cooperatives in India have turned out to be one of the most successful ones across the world. The White Revolution, which took place in India, was possible because of the cooperative movement. Amul is one of the best examples, globally. It has done so well that the company could give back 75 per cent of its profits to the farmers. That is the power of cooperatives. Everybody talks about rural development, but nothing can bring about this development the way cooperative sector can. Even financially, in case a farmer needs loan, cooperative banks are there to help him out. More importantly, these cooperatives do not run on funds given by the government, but the money contributed by its own members. Ever since the emergence of new-age economic policies, the cooperatives have to compete with the commercial institutions run by MBA graduates and finance experts. Moreover, funding is never a problem for big institutions, but this is not the case with cooperative institutions. The office-bearers in cooperatives work on voluntary basis; even a Chairman, who is a full-time appointee, gets very little pay. But, despite these constraints, the cooperative movement has done more good towards rural development than anything else.
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Why do you think cooperative movement has been aggressive in few states unlike most others? The reason behind it is that in cooperatives, you need a dedicated leadership, which was provided in those states. Along with that, the government should also encourage the growth of cooperatives through its policies. In some states, the government encourages building up of cooperatives,
Banking
Ghanshyam Amin but leaders didn’t emerge to take the lead, so the entire exercise proved futile. After Independence, Sardar Patel and Mahatma Gandhi had clearly told their followers that real independence will come when the development of the villages will start taking place. Accordingly, their followers went to villages and explained to the farmers how working in cooperatives will empower them and solve their problems. Similarly, the dairy farmers were convinced to work in cooperatives, the result is there for everyone to see.
What are your expectations from the government? The government must act as a benevolent supervisor, but the day-to-day work of cooperatives should not require permission from government officers. They should definitely do audits, but these must be fair and impartial. Politics should be kept away from cooperatives as its aim is to serve the poor. Even the leaders from the opposition parties should not be treated differently. There have been instances where the elected body is superseded and a government officer is made administrator. But, this officer has so much work of the government that he cannot concentrate on the work of the cooperative properly. Even if he manages to work for the cooperatives, he can’t take independent decisions for its betterment. So, it is imperative that the government does not try and influence the cooperatives.
There have been examples like Madhavpura scam where the administration of the cooperative banks was found at fault. What is your opinion about it? Transparency is important in any administration, and with the advancement of technology, that is happening fast. Everything is going online, leaving little scope for foul play. As for the Madhavpura scam, it was a different story. Many companies are registered under the Companies Act and a lot of these down their shutters after taking money of the investors. But unfortunately, not much has been done for that. However, in cooperatives, whatever we do is a service to the people, and anybody going against the spirit has to face the music. Almost in every institution, scams take place, including the government setups, though they have the best-defined norms of operation. So, it’s time we took lessons from scams like Madhavpura and moved on.
What is your dream project? Talking on a global scale, there are various cooperatives that are doing better than some of the best cooperatives in
India. Here, some cooperatives have registration, but lack professionalism. There should be a strong HRD and professional management mechanism in place. Further, there must be a speedy procedure to resolve people’s issues, only then we can compete with the best. We can take example of companies like Amul that have given competition to the ones like Nestle and Cadbury. Even government should aim for such things. If a particular cooperative is week, the government should try and strengthen it instead of going for its liquation.
The White Revolution, which took place in India, was possible because of the cooperative movement. Amul is one of the best examples, globally What best practices can be adopted to ensure progress of cooperatives? If we talk about the cooperative sector in Gujarat, it is truly the backbone of villages. A few years back, India faced a draught. While some states faced problems like lack of animal fodder and agricultural commodities, the situation was different in Gujarat. With a vibrant cooperative sector in place, people did not have to face much problem. Just as we have done in case of Milk and Sugar segments, we should also strengthen cooperatives for other agricultural products. For instance, farmers sell potato at two rupees per kg in the market, but the consumers pay a lot more for the by-products like chips. We should make a federation and help farmers get machines to make chips and replicate the model of Amul. APRIL - JUNE 2015 | bfsi.eletsonline.com | BFSI
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Federation
Jyotindrabhai Mehta
Small is Beautiful for Gujarat Coop Banks Small banks in Gujarat could have grown bigger, but they have chosen to remain small to serve the communities in which they exist better, says Jyotindrabhai Mehta, Chairman, Gujarat Urban Cooperative Banks Federation, in an interaction with Sneha Mejari of Elets News Network (ENN)
The Gujarat Urban Cooperative Banks Federation (GUCBF) has a campaign called ‘Proudly Cooperative’. Can you tell us something about its foundation and the idea behind it? Our federation is made of 226 urban cooperative banks which exist in Gujarat as on today. These banks range from very small with deposits of `2 crore to very big like Kalupur, which has `7-8 thousand crore deposit. Half of the banks under us are unit banks, but these have chosen to be small. For example, there is a bank called Gandhidham Cooperative Bank in Kutch, which came into existence in 1949. The city of Gandhidham and Adipur itself were founded after 1948 when the refugees from Pakistan settled there. These refugees had left everything back in Pakistan and were starting the life afresh. Bhai Pratap Dialdas, along with few others, started the Bank with no capitals whatsoever, but they had ideas. Today, this Bank has grown in line with the growth of Adipur. In Jambusar, there is a cooperative bank, which is 110 years old and works for economic empowerment of the people of the town. Similarly, the Rajkot Nagarik Sahakari Bank is now a very big Bank, which we had started with a capital of `849. The capital did not come from the government, but from the locals. So, that is the history of cooperative banks in Gujarat. We are serving the middle and lower classes of people, and thus, adding to the financial inclu-
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Federation
Jyotindrabhai Mehta sion drive. Cooperative is no capitalism or communism; it’s simple cooperative-ism. ‘One for each and each for all’ is the principal of cooperatives, and that is the foundation of our campaign ‘Proudly Cooperative’.
drive, cooperative banks can do rural penetration much better as compared to commercial banks.
What has been the contribution of cooperatives in the economy of Gujarat?
Technology facilitates smart banking. So, at the Federation, we have started a specialised centre, which will provide all technological assistance to small banks. The RBI wanted all the small banks to be enabled with Core Banking Solution (CBS). But, at the same time, the expenditure to be incurred by small banks to do this is too much. So, compulsion will not serve the purpose. We are in touch with IDRBT and NPCI, both these have agreed and have come up with proposal to help us with smaller banks to be technology enabled. But, we still need some hand-holding from the RBI. In fact, the RBI in the Gandhi Committee Report has also suggested that there should be some financial support for the small banks. But, technology is a must and I would like to quote Bill Gate that “Banking that we see today will be diminished like dinosaurs tomorrow”.
There are 226 urban cooperative banks, 18 district cooperative banks and one Gujarat State Cooperative Bank. Apart from these, we have milk producing cooperative societies, consumer cooperatives, cooperative housing societies, etc. So, the concept of cooperatives has been keeping Gujarat’s economy vibrant. A small example of this can be the information given in the advertisement of Amul, wherein they mention that daily 47 lakh women across 15,000 villages collect milk worth `17 crore every day. This is one of the biggest examples of women empowerment implemented so far. If the story of cooperatives were taken away from the history of State, Gujarat would not have been this vibrant.
What is the reason of success of cooperative banks in Gujarat? There are various reasons for the success of the cooperative movement, but one of the main reasons is integrity of the people of Gujarat and also the entrepreneurship, which flows in the blood of Gujarati people.
How come the size of small banks has remained small? The small banks have chosen to be small. They would have grown, but they had decided to serve the community in which they exist. We can imagine how the bank in Jambusar could have grown after 110 years. But, the locals had decided to keep it small. Moreover, the banks' management feels that small is beautiful. The decision taken by banks to cater to the communities have made so many lives better. So, we need to understand that the aim of the bank is to cater to the needs of its people and not just to grow as a big bank.
What can RBI and the government do to better the cooperative banks’ future? Be it the RBI or any other regulator, they need to understand the language of small people. We need to give more to further expand the concept of cooperative–ism, so that the regulators understand cooperatives better.
What would you like to say about the role of cooperative banks in PMJDY? PMJDY is a laudable initiative by the Modi Government. Cooperative banks can be a good vehicle to achieve this dream of financial inclusion. Although commercial and nationalised banks can help immensely in fostering the
How do you think advancements in technology are impacting the banking sector?
Cooperative is no capitalism or communism; it’s simple cooperativeism. ‘One for each and each for all’ is the principal of cooperatives, and that is the foundation of ‘Proudly Cooperative’ campaign How ready are banks to accept the technology advancement? Banks are ready and as a federation, we are influencing these to get into the technology game. This is the reason we have started CBRD. We are in the process to articulate the system and bring these into technology. We, along with the State’s cooperative banks in Gujarat, are trying to bring a concept of cooperative ATMs, which will help small banks a lot. The project is still under discussion, so I cannot reveal much detail, but we are working towards that.
What is your dream project? As a federation, we are dreaming to develop a cooperative umbrella, in which it will be easy for smaller banks to work. All the banks must be connected with technology, so that small banks don’t have much of burden. The umbrella works from down to up and from up to down, so the idea is that the bigger banks will help the small banks. As an individual, I very firmly believe in cooperatives and we want to serve to the smaller people, as it changes the lives for better. I would like to conclude by once again quoting Bill Gate, where he says, “Banking is necessary, banks are not.” APRIL - JUNE 2015 | bfsi.eletsonline.com | BFSI
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BFSI
Dr KShatrapati Shivaji
Nearly 5.77 crore small businesses in the country still remain underserved in terms of formal funding, and the government’s MUDRA plan is aimed at bridging that gap, says Dr Kshatrapati Shivaji, Chairman and Managing Director of Small Industries Development Bank of India (SIDBI), in an interaction with Kartik Sharma of Elets News Network (ENN)
MUDRA to Serve the Bottom of ‘Pyramid' Tell us about the government’s ambitious scheme of Pradhan Mantri Micro Units Development & Refinance Agency (MUDRA) Yojana. The goal of Pradhan Mantri Micro Units Development & Refinance Agency (MUDRA) Yojana is to achieve a truly economically inclusive growth. As per the National Sample Survey Office (NSSO) report of 2013, there are 5.77 crore small business units, mostly proprietorships, running small businesses, trading or service activities, 62 per cent of which belong to SC/ ST/OBC category entrepreneurs. These units have hardly any access to formal credit facilities. Most of these ‘own account enterprises’ (OAEs) form the bottom of the pyramid of Indian economy, which still remains unserved and underserved in terms of formal funding. These OAEs affect the country’s economy immensely. They feed large local and international value chains as well as domestic consumer markets as suppliers, manufacturers, contractors, distributors, retailers and service providers. The estimated gross value addition of this sector
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is `6.28 lakh crore annually. But, support from the formal banking system to this sector is meagre. Mainstreaming these OAEs will not only help in improving the life of these entrepreneurs, but also contribute substantially towards employment generation, thereby achieving higher GDP growth. It was in this backdrop that the Union Budget 2015-16 announced setting up of MUDRA. The formal launch of MUDRA was done at the hands of Prime Minister Narendra Modi, on April 8, 2015. This agency will be responsible for the development and refinancing of all Last Mile Financing Institutions (LMFI) like Micro-finance Institutions (MFIs), which are in the business of lending to micro/small business entities engaged in manufacturing, trading and service activities, Societies, Trusts, Section-8 Companies, Co-operative Banks, small banks, scheduled commercial banks and regional rural banks. MUDRA will partner with state level/ regional level co-ordinators to provide finance to the ‘last mile financiers’ of small/ micro business enterprises. To begin with, MUDRA has started functioning as a subsidiary of SIDBI.
BFSI
dr kshatrapati shivaji What will be the role of MUDRA in providing financial assistance to the ‘unfunded’ small entrepreneurs, who provide employment to a large number of people? To start with, MUDRA would offer two basic categories of products, viz., refinance products for the micro units having loan requirements up to `10 lakh, and support to MFIs and LMFIs for on-lending. While, for the latter, MUDRA would start by lending to MFIs/NBFCs for creation of outreach, there is need for devising newer means of addressing larger outreach through intermediation, aggregation and franchisee mode, as may be considered suitable. MUDRA will work with the state level/regional level agencies to provide finance to end financiers of small/micro business enterprises. Moving forward, MUDRA is also expected to lay down guidelines for registration of MFI entities, their supervision, accreditation and rating them, laying down responsible financing practices to ward off over-indebtedness and ensure proper client protection principles and methods of recovery, development of standardised set of covenants governing last-mile lending to micro enterprises, promoting right technology solutions for the last mile, formulating and running a Credit Guarantee Scheme for providing guarantees to the loans/portfolios being extended to micro enterprises, supporting development and promotional activities in the sector, and creating a good architecture of last-mile credit delivery for micro businesses.
How will MUDRA help generate confidence among the small entrepreneurs, who have been prone to exploitation at the hands of money lenders so far? As per the broad guidelines set up for MUDRA, a minimum of 60 per cent of support will flow to enterprises in the smallest segment. In addition, partner intermediaries of MUDRA are expected to encourage first-time entrepreneurs, youth entrepreneurs (aged up to 30 years) and women entrepreneurs, and design special schemes for such entrepreneurs. Further, emphasis shall be given to cash flow-based lending and not security-based one, thus avoiding any collateral security. The good news is that repayment obligations shall be flexible and framed keeping in view the business cash flow of the entrepreneur. In future, MUDRA would attempt to offer innovative products like a pre-loaded MUDRA card offering a Portfolio Guarantee product, creation of resources for credit enhancement/ guarantee facility by way of a charge on the outstanding loans under refinance, lending through business/ banking correspondent model etc. Since loaning will be done through all LMFIs, including MFIs, NBFCs, banks and Societies/Trusts, it will be possible for the small entrepreneurs to get the financial assistance without depending on informal sources.
What can be the challenges in proper implementation of MUDRA, and how will you overcome those? The challenges faced by MUDRA would be the vastness of the area to be covered and the large number of beneficiaries to be reached. This would be addressed through forging proper collaborations with partner institutions, including the LMFIs. The two challenges faced by the sector are availability of credit and making it available to the very small enterprises at a reasonable cost. And these two challenges will be addressed suitably by MUDRA by evolving suitable products and funding mechanism. As per some estimates, size of the microfinance market, comprising the Self Help Group Bank linkage and microfinance institutions, is as large as `1.4-`2.5
MUDRA would offer two basic categories of products, viz., refinance products for the micro units having loan requirements up to `10 lakh, and support to Micro-finance Institutions lakh crore at penetration levels of 50-70 per cent and average ticket size of `35,000- `45,000 per household. With the announcement of upward revision in the eligible loan size and income levels under micro finance in the policy statement by the RBI on April 7, 2015, this market is expected to expand further. In addition, with economies of scale that is expected to accrue to the MFIs, reduction in operational cost of MFIs will also be seen. These will augur well for the sector and MUDRA. MUDRA is poised to meet the expectations of the sector, thereby creating an inclusive economic architecture. There is a lot of expectation from MUDRA and so are the challenges. Let me assure that while addressing the immediate challenges, we shall devise systems and procedures, and suitable policies to overcome the challenges that MUDRA will come across in its newly started journey. APRIL - JUNE 2015 | bfsi.eletsonline.com | BFSI
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Banking
Narendra S Dabhi What is the role cooperative banks play in our society? The simple looking banking activity of accepting money deposits from people and then lending the same to borrowers encourages flow of money for productive use and investments. This, in turn, helps the economy to grow. In the absence of banking business, savings would sit idle in our homes, the entrepreneurs would not be in a position to raise money and ordinary people dreaming for a new car or house would not be able to realise their dreams. The Government of India, which started the cooperative movement in 1904, decided to develop cooperative banks as the institutional agency to tackle the problem of usury and rural indebtedness. In such a situation, cooperative banks operate as a balancing centre. At present, there are several cooperative banks performing various financial, administrative, supervisory and development functions, thus promoting expansion and development of cooperative credit system.
How important is financial inclusion for India and what role can cooperative banks play in the financial inclusion drive of the government?
Coop Banks Key Link
i n Financial
Inclusion Cooperative banks understand the local needs better and help crack the psychological barriers in the 'last mile' of financial inclusion, says Narendra S Dabhi, Managing Director, Adarsh Cooperative Bank Ltd, in an interaction with Sneha Mejari of Elets News Network (ENN)
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Primary cooperative banks, popularly known as Urban Cooperative Banks (UCBs) in India, can play a vital role in financial inclusion. The distance – relational as much as physical - of commercial banks from their clientele has arguably been a key reason for low penetration of banking services among the financially excluded groups. This is where the cooperative banks have a clear advantage, being local in nature and being intricately interwoven with the local community. It is easier for the cooperative banks to crack the psychological barriers in the 'last mile' of financial inclusion, create trust for the bank among its target community and bring customers within its fold. These days when big commercial banks work hard to set up branches and make use of technology to reach out to the untapped regions of the country, the cooperative banks can step into the game.
What role does RBI play in the operation of cooperative banks? The Reserve Bank of India has been vested with powers to issue licence to UCBs under Section 22 and 23 Banking Regulation Act, 1949 (AACS) to carry on banking business and to open new places o––f business (branches, extension counters, etc.), respectively. For this, guidelines on the eligibility criteria for issuance of banking licence/ branch licence are issued to UCBs from time to time. As a regulator, the Reserve Bank has prescribed prudential norms in various areas, e.g. capital adequacy, income recognition, asset classification and
Banking
Narendra S Dabhi provisioning, exposure to single/group borrowers, exposures to sensitive sectors, loans and advances, investments, liquidity requirements, etc. The Banking Regulation Act, 1949 (AACS) provides for submission of periodical returns by UCBs to the RBI. Further, under the powers vested in the central bank, it has prescribed various other periodical returns to be submitted by UCBs. It carries out on-site inspections and off-site surveillance of UCBs. It also issues directions and operational instructions to UCBs, wherever necessary to streamline the functioning and to protect the interests of the depositors. The RBI also imparts training to the officials of UCBs to upscale their knowledge, skill and expertise. The Reserve Bank signed an MoU with the Central Government and various state governments for harmonisation of regulation and supervision. The circular instructions issued to UCBs from time to time are placed in the Reserve Bank’s website. Further, for discharge of its functions, the RBI has prepared operation manual, Job Cards, manual for on-site inspection of UCBs, manual of instructions for UCBs, etc., and issues internal circulars/instructions from time to time.
How is technology impacting the banking ecosystem? Explosion of technology is changing the banking industry from paper and branch banks to digitised and networked banking services. It has already changed the internal accounting and management systems of banks. It is now fundamentally changing the delivery systems banks use to interact with their customers. It is clear that this new technology is changing the banking industry forever. Banks with the ability to invest in and integrate information technology will lead in the highly competitive global market. Bankers are convinced that investing in IT is critical. Its potential and consequences on the banking industry future is enormous. The changes that new technologies have brought to banking are enormous in their impact on officers, employees and customers of banks. Advancements in technology are allowing delivery of banking products and services more conveniently and effectively than ever before. IT has increased the level of competition and forced them to integrate the new technologies in order to satisfy their customers.
How would you see technological advancements as a facilitator of financial inclusion? How important is Financial Literacy in this regard? We believe that financial literacy is a powerful tool to empower people, one that will help accelerate the pace of financial inclusion. The Bank undertakes rural financial literacy initiatives off and on. Development in a large country such as ours brings with it various challenges; the foremost is to translate economic growth into sustainable develop-
ment. To achieve this, it is critical that growth be inclusive. At the core of this strategy is our commitment to reach out to the marginalised communities through our Sustainable Livelihood Initiatives and to encourage each business to include social and environmental considerations as part of their business processes.
How can the cooperative banking sector be encouraged further by the government or RBI? The Reserve Bank may have to provide assistance to the UCBs, particularly to the smaller ones, for improving their skill levels. Since the College of Agricultural Banking is already providing training facilities to the UCBs, this institution could be used as the forum for doing so. Keeping in view the financial implications of providing quality training for banks, the cost of training programmes could be largely subsidised by the Reserve Bank. The RBI has been encouraging the UCBs to invest in government securities by stipulating that a portion of the SLR investments are held in the form of these securities. At the same time, it would be necessary to ensure that the UCBs are not put to any
Explosion of technology is changing the banking industry from paper and branch banks to digitised and networked banking services difficulty in buying and selling the securities. To address this issue, Reserve Bank may, through its Regional Directors, liaise with the network of Primary Dealers to put in place an appropriate arrangement in this regard.
Tell us about the future plans you have for your bank. To meet the challenges being faced by the banking industry, the Bank has geared itself by reorganising its structure and decentralising the power to speed up decision making in all spheres of activity. For this purpose, the Bank is working towards Total Automation and paperless banking where processes could expedite for better customer services. The bank is slowly and steadily increasing its service portfolio by tying up with payment delivery channels. Even in the era of new age banking and stiff competition, the bank has and will always retain its focus on small depositors and small borrowers. Improving the life of the common man has been the Bank's vision for the past four decades and will continue well into this millennium. Adarsh Cooperative Bank Ltd has crossed last year’s business of `1,000 crore and has taken target to achieve `1,500 crore mark this financial year. ď Ž APRIL - JUNE 2015 | bfsi.eletsonline.com | BFSI
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APMC
Jitendra Pandya
Farmers Find a Friend in APMCs The basic idea behind the formation of the Agricultural Produce Market Committees (APMCs) is to ensure ‘open auction, exact weight and spot payment’ in cash for agricultural produce of farmers. In an interaction with Elets News Network (ENN), Jitendra Pandya, Director, APMC, Government of Gujarat, says that these Committees play a very useful role for the farmers, as these help them get highly competitive prices for their produce Tell us about the existing agricultural marketing system in Gujarat. The regulation of markets in Gujarat was started in the year 1935 during the regime of former Princely State of Baroda. Baroda State had established regulated market at Bodeli in the year 1937-38. Thereafter, the Bombay State Government formulated the Bombay Agricultural Produce Market Act 1939. In Saurashtra region, the regulation was introduced after the formation of Saurashtra Union and enacted in the year 1954-55. With the bifurcation of bigger bilingual Bombay State and the formation of Gujarat State, different laws were unified and the Gujarat Agricultural Produce Markets Act 1963 was enacted. However, the State Government amended the Gujarat Agricultural Produce Markets Act in 2007 and more recently in 2015.
How has been the performance of APMCs in Gujarat? There are 213 APMCs working in the State — 213 principal yards and 187 sub-yards, taking the total number of markets to 400 in the State. Classification of APMCs is done
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as per their yearly income: those with `70 lakh and above transaction come in Class ‘A’, `40 lakh to `70 lakh in Class ’B’, `20 lakh to `40 lakh in Class ‘C’ and below `20 lakh in class ‘D’. There is an open auction of agricultural produce of the farmers by the licenced traders of APMC. The trader, who makes the highest bid, purchases the agricultural produce. The procedure of auction is managed by an auctioneer of APMC and the goods are weighed on electronic weighing machines, and buyers pay to the farmers in cash. Besides, purchasers also have to pay market cess to the Committee, which is decided by APMCs at the rate of not less than 30 paisa and not more than two rupees for every hundred rupees. These Committees in the State play a very useful role for the farmers, as these help them get highly competitive prices. APMCs provide many other facilities to the farmers. Many of these provide financial support for agriculture inputs, equipment, drip irrigation etc., while some also do charitable activities. The primary aim of formation of APMC is to protect the
APMC
Jitendra Pandya
farmers from exploitation of traders and moneylenders. Its main motto is open auction, exact weight and spot payment in cash for of agricultural produce of farmers.
through e-market system. This helps farmers of one State to buy agricultural produce of another State. The Gujarat Government is also thinking to introduce the same concept.
What are the major steps taken by the State Government for the welfare of farmers?
What are the major challenges that APMCs in the State face in their day-to-day functioning?
APMCs are working for improvement of the lot of farmers. Since a farmer can understand the problems of farmers better, the State Government recently amended the Agricultural Produce Market Act and made some drastic changes to it, providing that only a farmer become Chairman of an APMC. The State Government has denotified fruits and vegetables from regulated commodities; now trading of fruits and vegetables is fully open in the State. We have also made provisions for private markets for the trading of all kinds of commodities, single levy system, direct purchase from farmer, common licence, farmer consumer market, e-market, contract farming, etc.
In the tribal and interior areas, farmers are not bringing
What is the dream project of the State Government with regard to marketing of agricultural produce? The Government wants to connect all APMCs through computers, so that anybody can know about day-to-day arrival of agricultural produce and their prices. This will help farmers sell their produce as per the real market situation. The Government has also made provision for 100 warehousing godowns in APMCs in this year’s budget, so that farmers can store their produce in the season and sell when the price is better. They can also get loan on warehouse receipts. Recently, the Karnataka Government started the concept of a single market in the State. In this system, the whole State is single market and traders of the entire State bid in auction
The Government has made provision for 100 warehousing godowns in APMCs in this year’s budget, so that farmers can store their produce in the season and sell when the price is better their produce to APMCs. In these areas, land holding of farmers, and agricultural produce is very small. So, it is not profitable for the farmers to bring their produce to APMCs. There are many poor farmers in the State, who borrow money from moneylenders before cultivation to purchase seeds, fertilisers and pesticides. They also borrow money for social and religious ceremonies, selling their produce to the lenders. Besides, due to lack of information, farmers are also not well aware about their agricultural produce that they bring to the market direct from farms. They do not do cleaning, sorting, grading and other similar processes before coming to the market. As a result, they do not get the right price. In addition to these, there is also not sufficient storage facility in APMCs for the farmers to store their agricultural produce. ď Ž APRIL - JUNE 2015 | bfsi.eletsonline.com | BFSI
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Cooperatives Special feature
for Common
Man
The Gujarat Urban Cooperative Banks Federation (GUCBF) represents the interests of the urban cooperative banking sector of the State. Its branding initiative ‘Proudly Cooperative’ has generated a sense of bonding among the member banks and given them a distinct identity, writes R N Joshi, IAS (Retd.) and Chief Executive Officer of the Federation
financial inclusion and inclusive growth by satisfying the common man’s needs.
Role of Coop sector
T
he Cooperative Banking sector in Gujarat has been catering to the needs of common man of Gujarat for several decades now. In fact, one of the bricks in the foundation of the Reliance Empire by Dhirubhai Ambani came from the cooperative bank in Gujarat. This proves the commitment of cooperative banking sector to serve the common man of Gujarat and become the financial powerhouse for them. The formation of Gujarat Urban Cooperative Banks Federation (GUCBF) was just another attempt to demonstrate the will and efforts taken towards socio-economic upliftment of the common man in Gujarat. The Federation was established in March 1975, in accordance with the provisions of the Gujarat Co-operative Societies Act 1961. Ever since, the Federation has been playing a catalytic role in transforming the cooperative banking sector into a financial powerhouse with strong network, which should become the preferred choice for customers and significantly contribute to the twin national objectives of
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The cooperative sector has played a significant role in the lives of citizens of this State. There are more than 70,000 cooperatives having 1.25 crore members in the State of Gujarat. Thus, every fifth man in Gujarat is associated with the cooperative movement. The sector has seen the golden days in the field of Milk, Housing and Credit & Marketing. The sector has given best of the co≠operative leaders like Vaikunthbhai Mehta, Sakalchandbhai Patel, Atmarambhai Patel, Tribuvandas Patel and Dr Verghese Kurien, to name only a few. Cooperative philosophy is a balancing force against Capitalism versus Communism. During the financial crisis in America and elsewhere in 2008, the world survived because of the strong cooperative sector in America and Europe. Even today, the cooperative sector can play a significant role in building a new India, as envisioned by Prime Minister Narendrabhai Modi with ‘Make in India’, ‘Digital India’, ‘Jan-Dhan Yojana’ and ‘Swachh Bharat Abhiyan’. In all these sectors, cooperatives have a presence and, therefore, they can become an instrument to change, as they are very close to the rural as well as urban people.
‘Proudly Cooperative’ The GUCBF, Ahmedabad represents the interests of the urban cooperative banking sector of the State, in particular, and the cooperative movement, in general. By virtue of its eminent position, it continuously strives to protect and safeguard the interests of the member banks of the State and the depositors, who have placed their faith in the member banks. The Federation played an active role as a facilitator between the member banks and the various
Coopereatives Special feature regulatory authorities on all policy as well as procedural issues and actively liaises with all agencies for furthering the interests of the cooperative movement in the State. It is in this context that the Federation decided way back in 2007 to create a strong image of the member banks, Credit Societies, Regional Federations etc. By way of branding, the Federation obtained a registered trademark "Proudly Cooperative" in January 2007. The logo is a joint venture of the Federation, and its users have a feeling of bonding through the logo. In the last seven years, the Federation has persuaded all member banks to enter into an MoU with the Federation and use the logo for all practical purposes, which has generated faith among the users that they belong to the cooperative fraternity. Our logo was widely appreciated during the “International Celebration of Centenary Year of Co-operative Movement” in 2012 at Bhopal. The Federation exhibits its logo anywhere in the world where it is a participant, collaborator or supporter or in any cooperative programme.
Mumbai and Ahmedabad offices; V S Das, Executive Director (Retd), RBI; chairman of all state-level federations; and representatives of 226 banks participated in this mega event. During the event, the Federation also launched the Centre for Banking Research, Development & Excellence (CBRDE) at the hands of the Hon'ble Chief Minister of Gujarat. This Centre is a frontrunner as the State Umbrella Organisation, as envisaged by RBI's Committee on State Umbrella. CBRDE works for capacity building and has created a platform for Urban Cooperative Banks for technological leverages and many more technological upgradation.
Technology in Coop banking
Cooperative banks can survive only if they adopt technology. After CBS and CTS, technological leverages of the urban cooperative banking sector have reached the third phase, providing customer satisfaction through technology. Financial inclusion of the unbanked masses is a herculean task. However, as a viable entity, cooperative banks will have to adopt ATMs, Mobile Banking and Net Sahakar Setu Banking in the future. The Federation is striving hard to The GUCBF organises a seminar every three-four years, bring all cooperative banks on technology platform, so in which member banks meet and resolve their issues. It as to compete with commercial/private banks. It is 'Sahkar Setu’, a GUCBF seminar held through technology only every three-four years, sees member that cooperative banks banks meet and resolve their issues. It will be able to deliver best is also an occasion for the Federation to services to their customers. The Federation is in review its activities and problems faced touch with the Institute by member banks for Development and Research in Banking Technology (IDRBT), Hyderabad, for facilitating technology in is also an occasion when the Federation reviews its activicooperative banks. ties and problems faced by member banks. Since 2007, this state-level event has been christened as "Sahakar The next important thing which the Federation has Setu". This seminar generally takes place at an interval of initiated relates to banking research. We have a team of four years. Last year, Sahakar Setu was held in June at experienced bankers like V S Das, former Director, RBI, Mahatma Mandir, Gandhinagar, and its theme was ‘Nextand K V Lakum, GM (retired), Bank of India and a veteran gen Cooperative Banking’. training consultant, who keeps guiding 10,000-odd workforce of the urban cooperative banks of Gujarat. We have Of late, a view has emerged that though banking adopted a three-pronged strategy at CBRDE: system is heterogeneous in nature with good network, it has nevertheless not been able to provide bankl We invite faculties from the College of Agricultural Banking (CAB), Pune, and train our Directors and ing services to nearly 45 per cent of the financially Senior Managers; excluded population. To bring a greater number of people under the cooperative banking system is a huge l We offer on-location training wherein our faculty memtask, for which the Federation wants urban cooperabers go to the banks and train the employees; and tive banks to utilise next-gen technology for faster and l For technology leverages, we organise state as easier banking. It is in this context that the Federation well as national-level seminars, in which we invite had organised this programme. experts. They share their experiences with the member banks. Hon'ble Chief Minister of Gujarat Smt Anandiben This strategy has given a boost to the whole coopPatel, banking luminaries like R Gandhi, Deputy Governor, RBI; Ilaben Bhatt, Director, RBI; N Vishwanathan, erative banking movement and we hope that in future, Executive Director, RBI; all senior managers of the RBI’s cooperative banking will further shine. APRIL - JUNE 2015 | bfsi.eletsonline.com | BFSI
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Banking
Rahil Patel
Coop Banks Serve
Grassroots Better Use of technology in cooperative banks have not only helped boost customer engagement but also elevate bottomlines of the banks, Rahil Patel, Chief Information Officer, Kalupur Commercial Cooperative Bank, says in an interview with Sneha Mejari of Elets News Network (ENN)
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Banking
Rahil Patel Give us your perspective about the impact of technological advancements on the Cooperative Banking sector. Advancements in technology have transformed Cooperative banking enabling the sector to provide many channels for customer service, customer attainment and retention, which were previously catered only through branch banking. Technological advancements have, thus, not only helped elevate the customer engagement but also elevate the bottom lines of the banks.
Commercial banks are running a scheme to open zero-balance accounts in the financiallyexcluded sectors and offering facilities like Mobile ATMs. Where do cooperative banks stand in this respect? It is essential for the banks to provide financial services to the unbanked citizens, and cooperative sector in general had evolved on this very premise. We are serving the sections of the society that need upliftment. The ongoing drive to open zero-balance accounts by commercial banks is good for the poor/rural citizens of the country, as it facilitates disbursement of various government aids directly into the beneficiaries’ accounts. But, it is also equally important to offer other complementary financial services to these citizens, so that it creates opportunities for them to grow and become financially secure, which would otherwise not be possible. This is where cooperative sector shines, as the financial institutions working at the grassroots are close to these individuals, be it farmers, labourers or tradesmen. The cooperative sector understands their requirements best and serves them accordingly.
How difficult or easy is it to maintain the hardware and software employed by the cooperative banks on account of use of technology? Hardware/software per say is not a challenge; instead, finding good, skilled resources is a big challenge and even if a bank is able to find/recruit the needed talent, retaining them becomes an even bigger challenge. This human resource dependency makes hardware/software maintenance a real challenge.
employees, who need to proactively respond to everchanging threat perceptions to such channels.
What are the IT initiatives you are looking to implement in the Kalupur Commercial Cooperative Bank? Banking in general has become commoditised. We are, therefore, looking at initiatives that can earn a different name to our brand, help us capture new sources of revenue and de-risk competition from new players while enhancing customer interaction.
Business of banking is transforming at a pace like never before – banks that embrace meaningful customercentric technology will see sustained growth and profits What challenges do you face in convincing your customers for IT adoption? Customers have preconceived notions while banking with a cooperative bank, and breaking them away from their notions is the toughest challenge we face.
With banking fast shifting to internet and mobile phones, do you think security is emerging as a challenge?
Where do you think technology will take the cooperative banking sector in the next five years?
Security is always a concern, as banks deal with financial information of its customers, who may or may not be tech savvy. The sophistication of intruders is much higher, with impact more disturbing for customers who are adopting these new electronic channels of banking. Of equal importance is preparedness of bank’s technology-handling
Business of banking is transforming at a pace like never before – banks that embrace meaningful customer-centric technology will see sustained growth and profits. My opinion is that technology will no longer remain an option; rather it will become a necessity for cooperative banks to stay in business in the next five years. APRIL - JUNE 2015 | bfsi.eletsonline.com | BFSI
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Dairy
Shankarsinh R Rana
Quality Makes Dairy
Products ‘Madhur’ Quality is the key to success for any customer-oriented business organisation, and so is the case with dairy cooperatives that supply their products to households on a daily basis. In pursuit of quality, Madhur Dairy is making an all-out effort to make use of technology to further improve its products, says Shankarsinh R Rana, the company’s Managing Director, in an interaction with Sneha Mejari of Elets News Network (ENN)
Tell us about the origin and evolution of Madhur Dairy. When I joined Madhur Dairy in 2003, it was quite small in size with a turnover of `66 crore. We started holding meetings in villages with dairy farmers and tried to make them understand the importance of education, lack of which had also led to large scale unemployment. However, those farmers failed to understand the value of education immediately. So, as the next step, we started holding mass awareness campaigns. We conducted various programmes and organised functions, and also arranged lectures to make people aware of the dairy products and its demand. Eventually, this led to a change in the attitude of farmers as well as the success story of Madhur Dairy.
What according to you is the reason behind the success of dairy cooperatives in Gujarat? After a module started by Tribhuvan Kaka as well as Mr (Verghese) Kurian, farmers started bringing milk to the cooperatives, and the cooperatives by developing a federation created a much bigger market for milk and milk products. This is one of the major reasons behind the success of dairy cooperatives in Gujarat.
For dairy cooperatives, it is extremely important to maintain the quality of products. What is your view about it?
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I believe that the quality of products is the main factor leading to success of any dairy. Amul is a popular brand name in the market because of the quality maintained by them. Even at Madhur Dairy, we never compromise on the quality of our products. Our every product has a consumption of
SUMMIT RAJASTHAN CONFERENCE, AWARDS & EXPO
Dairy
Shankarsinh R Rana 99 per cent in Gandhinagar area. We can take an example of ghee; the quality of ghee is measured by Methyl Red (MR) test. The Amul Ghee has 28 per cent MR, Sagar Dairy has 26 per cent, and Madhur is one dairy which has 33 per cent MR. It clearly proves the quality we try to maintain at our dairy.
What is your strategy for growth in the coming days? Ever since I have come on board, we have increased the number of sweet products from three items to eight. We didn’t use to produce butter and cheese earlier, but now we produce all of these. Also, we try to introduce a new product every year, which helps the name of Madhur Dairy grow. This year, we did a ‘Mango Mahotsav’, where we tied up with various mango producers and tried to sell the best quality mangoes. Madhur Dairy is not only trying to grow in the products market, but we are also coming up with a college in the Chirada area. We want the children of farmers to go to this college, which will have good facilities. Although we are not directly into the field of education, we want to do this for the sake of our farmers. This is how we try to ring in development every year in our organisation.
How do you plan to contribute to the development of cooperatives? If we want true development in cooperative sector, especially in the dairy sector, the government interference must be reduced. For instance, if one wins election and becomes the Chairman for one term, there are a few things he plans for the development of the cooperative body concerned. Later, in the next elections, if another person is elected, he will have different vision and plans, which might not help in rapid development. I have been here for four terms now and am ready with a blue print for the development of Madhur Dairy. However, a little freedom is required to implement it well. This will also allow availability of more facilities to the farmers. Greater the freedom given to the cooperative sector, better the progress will be.
Do you have any demands from the government? The price of milk has been increased by one rupee
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I believe that the quality of products is the main factor leading to success of any dairy. Amul is a popular brand name in the market because of the quality maintained by them starting this month. There are a lot of states where cooperatives are giving subsidies on milk. In Gujarat, ever since the inception, the cooperative sector and the government have been on two different sides. I believe that just as the government provides subsidy on gas, we should have subsidy for both the dairy farmers as well as the consumers that will ensure progress of the dairy cooperatives.
What are your future plans? As of today, Madhur Dairy procures two lakh litres of milk. We can take this to 10 lakh litres if we get permission to procure milk from areas around Gandhinagar. There are lots of dairies which procure milk from outside the State of Gujarat and we have a vision that by 2020, we will try and procure milk from states like Madhya Pradesh, Rajasthan and Uttar Pradesh, as the cooperative sector there is not as strong as in Gujarat. Our aim is to become number one with 60 dairy cooperatives in Gujarat.
Training
S O Junare
Greasing Wheels of Cooperatives With a democratic management set-up and dedicated leadership, the cooperative sector is making a significant contribution to the economy of the country. S O Junare, Director, National Institute of Cooperative Management (NICM), tells Elets News Network (ENN) how the organisation has been working towards empowering the cooperative sector
What does National Institute of Cooperative Management (NICM) stand for and what are its aims and objectives? The National Institute of Cooperative Management or NICM is an autonomous training and educational institution, promoted by the Gujarat State Cooperative Bank Ltd — an apex cooperative bank of the State. It is engaged in training, research, consultancy and publication in the field of cooperatives like cooperative banks, cooperative credit societies, cooperative sugar bodies, agriculture marketing, cooperative auditing etc. NICM is accredited by the National Bank for Agriculture and Rural Development (NABARD) as centre of professional excellence in cooperatives. It is also approved by the Gujarat Technological University as post- graduate centre for conducting MBA and MCA courses and Ph.D in Management and Cooperation.
What is your perspective on the contribution of cooperative sector to the economy of our country? Cooperative sector is the only sector which has more than 98 per cent reach in the rural India. It provides all necessary inputs, essential commodities and services to the people at reasonable rates at their
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Training
S O Junare doorsteps. The cooperative sector in India has 30-40 per cent share in milk procurement, milk processing, fertiliser production, marketing of agricultural inputs, and handloom and handicrafts production. The cooperative credit plays a significant role in credit disbursement, accounting for about 30 per cent of the total agricultural credit. Of this, 60 per cent share in the credit is given to small and marginal farmers. If cooperative sector had not been there, then over 50 per cent of these farmers would have no option but to go to moneylenders only.
What, according to you, is the reason behind better growth of the cooperative sector in states like Maharashtra, Gujarat and Kerala, as compared to others? Cooperatives are democratic and member-driven organisations. They are owned and run by the members for the socio-economic welfare of the community. Therefore, growth of cooperative societies depends on its members, especially the leaders. In states like Gujarat and Maharashtra, the reasons for progress of cooperative sector are democratic management and dedicated leadership.
How is NICM contributing to the development and growth of the cooperative sector? Since its inception in 1995, NICM caters to the needs of educating the management, imparting training to the employees and generating awareness among the members. The organisation conducts training programmes on various aspects of management, business operations, policy implementation and its implications. We at NICM conduct research in different areas and give suggestions to policy makers for sustainable growth of the cooperative sector.
What helped the Gujarat cooperative banking sector grow despite the Madhavpura scam? After Madhavpura scam, all the cooperative sectors became alert, as the government had introduced stringent norms. Managements of the urban cooperative banks (UCBs) took several steps to gain public confidence, and people at large have also become aware of the strengths and weaknesses of such banks. A number of professionally accomplished employees and directors entered the cooperative banking sector, and today, all existing urban banks are working in good condition.
What do you think is the next big thing in the cooperative sector? Several small cooperative societies, especially cooperative marketing societies, will face serious problems of existence. However, the well-established sectors like cooperative dairy and cooperative credit will continue to see sustainable growth. However, the government could reduce one tier from the three-tier cooperative credit structure. District Central
Cooperative Banks (DCCBs), PACs or state cooperative banks may also work together under a consolidated mode, and DCCBs may agree to work as branches of SCB, or PACs may work as the branches of DCCB. Also, the cooperative banks will adopt IT and other technological solutions to improve their services, retain old customers and attract new customers.
What initiatives will help further improve the cooperative sector? Cooperation among cooperatives is a key success mantra, and involvement of younger generation and professional management will help the cooperative sector grow further.
Cooperatives are democratic and member-driven organisations. They are owned and run by the members for the socio-economic welfare of the community What is your dream project vis-à-vis the cooperative sector? We have seen that when cooperatives become big, they lose the cooperative character, and start serving big people—who already have various alternative sources— conveniently forgetting the poor, downtrodden and the weaker sections. Our dream is to establish one integrated cooperative complex in Gujarat, which will have all types of cooperative societies under one roof. These societies will provide all kinds of services, including employment, business, income generating activities, health services, education, etc., at one place. We wish that each sugar factory, district-level dairy and cooperative banks having `100 crore or more deposits establish one educational institute or hospital. APRIL - JUNE 2015 | bfsi.eletsonline.com | BFSI
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Event Report bfsi summit 2015
Chief Guest, Shri Devendra Fadnavis, Chief Minister of Maharashtra, sits flanked by a host of dignitaries at the inaugural ceremony of BFSI Leadership Summit 2015. Guest of Honour, Shri Deepak Kesarkar, Minister of State for Finance and Planning, Maharashtra, sits on his right.
Technology Ladder to Take BFSI Higher The Department of Planning, Government of Maharashtra, along with Elets Technomedia organised BFSI Leadership Summit & Awards on 3rd February 2015 at Vivanta by Taj – President, Mumbai. The key idea behind this event was that India’s BFSI sector is going through a phase of transformation, while the Government of India, along with the Reserve Bank of India, is strategising to provide Banking and Financial services to each and every person in the country. The Government of Maharashtra is dedicated to work in sync with the Union Government and work towards robust payment systems and secure banking operations, leveraging advanced technology and the aspects that can play an important role in expanding Financial Inclusion. Thus, the Summit aimed to create a platform bringing together the Governments, Regulators, Bankers, Insurance providers, Industry experts and other key BFSI stakeholders for deliberations on transforming the BFSI sector through innovative solutions.
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Event Report BFSI summit 2015
mit rival at the Sum
ived on his ar inister being rece
Chief M
Shri Devendra Fadnavis, Hon’ble Chief Minister of Maharashtra inaugurated the event and shared his views on Financial Inclusion in the State of Maharashtra and the road ahead for it. The event also saw the presence of esteemed guests who discussed on various aspects of the BFSI sector. The Chief Minister of the State initiated his inaugural address by saying that for few years, there has been a debate about development and the ways to achieve it. He said, we want to achieve poverty alleviation, but also empower people to earn. Creation of wealth and value will lead us towards development, but we need to take care that wealth creation is not the ultimate goal, but equal wealth distribution is. To ensure this equality, we need a strong Banking and Financial sector which will play a vital role in the path of development. There are challenges and I believe this summit will address that. Financial Inclusion is just the first step. There is a long process to achieve the development. The proper use of appropriate technology, along with strong security for BFSI will create a robust infrastructure which will ensure adding reality to aims for the BFSI sector. We bring to you a session-wise report on BFSI Leadership Summit & Awards 2015.
venue.
Shri Fadnavis, along with othe r dignitaries, re issue of BFSI leases the inau magazine. gural
Inaugural Session: Revolutionising Indian BFSI Sector: Reaching to the Citizen at the Last Mile Deepak Kesarkar, Minister of State, Finance and Planning, Government of Maharashtra: He expressed his gratitude to the Department of Planning, Government of Maharashtra on organising BFSI Leadership Summit and Awards 2015, which brought together the leaders to discuss methodology for including the people at the last mile. He appreciated the commendable work done by the State of Maharashtra on enrolments of people under the scheme of Aadhaar. He also mentioned about the village-level enterprises which are active in Maharashtra and the poverty alleviation programme which he mentioned should be result-oriented than target-oriented. Shrikant Singh, Principal Secretary, Government of Maharashtra, Program Chair for BFSI Leadership Summit The Programme Chair for BFSI Leadership Summit 2015, Shrikant Singh and Principal Secretary, Planning, Government of Maharashtra, started the inaugural session by welcoming the dignitaries. He said that development today has two key phrases: Financial Inclusion and inclusive growth. The basic purpose of the seminar was to penetrate more in those sections of society which are not a part of the Financial services, and to unlock the potential growth of our country and State. He mentioned the idea of BFSI Leadership Summit was to bring together Government, Regulators, Banks, Insurance companies and other Financial services which can help us achieve development. april - june 2015 | bfsi.eletsonline.com | BFSI
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ering at the the august gath s se es dr ad is Fadnav Chief Minister mmit. y of the BFSI Su on m re ce opening
Participants re
K P Bakshi, Additional Chief Secretary, Home, Government of Maharashtra: Mr Bakshi started by highlighting the participation of the Government of Maharashtra stating that he initiated the idea of this summit, ACS Finance nurtured it further and eventually present Principal Secretary, Planning, presented it. He later changed tracks by speaking about the security concerns of the BFSI sector. He said, "The entire process of Financial Inclusion has to be taken forward with care by the regulators which will protect the interest of the investors. When we are dealing with 2.5 crores of newly inducted account holders, it is quite likely that they are going to be misled when we deal with insurance and other Financial services. Talking about banks, the increase in number of branches and ATMs has become a big responsibility with regard to its security which needs to be looked closely." S K Roy, Chairman, LIC: Representing the Insurance sector in the inaugural session, Mr S K Roy mentioned the achievement of the PMJDY project and its note in Guinness Book of World Records. He narrated the achievements of LIC in the State of Maharashtra, one among which is that LIC has an exposure of more than `3 lakh crore in the State as a whole, making it one of the largest investors in the State. “In the past, social security schemes didn’t see success because we did not have adequate delivery mechanism in place. Such large schemes cannot be managed without the vital role of technology�, said Mr Roy.
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gister themselv es to attend th
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Mohan Tanksale, Chairman, Indian Banking Association: Mr Tanksale represented the Indian Banking Associations at BFSI Leadership Summit. He kept two points before audience in his speech. The first one was the importance of Financial literacy after achieving the initial process of opening bank accounts and various initiatives taken up by different Bank and Financial services on the same. The second key point was the concept of business correspondents and their training which demands a lot of synergy, not only from the banking sector but other services as well. He concluded by appealing the technology services providers to work on providing the Banking services to last mile on mobiles. Deepak Mohanty, Executive Director, RBI: Mumbai being the Financial capital, it is great that the Government here took the initiative of organising such an event was his opening statement. He further said that Finance is the key for growth and economic empowerment. RBI has taken the first step by making a rule that every village with the population of 2000 will have access to Banking services through a branch or business correspondent. The next step is to provide Banking to more than 4 lakh villages with population less than 2000. PMJDY has given boost to this process. He added that we have opened the accounts, but need activity in those. KYC
Event Report BFSI summit 2015
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norm is simplified and Adhaar is accepted as a valid document. He also mentioned about the State-level committee that has been set up for scaling up and discussing the case to get rid of the loopholes in the system. He explained the shift of RBI from focus on universal banking to small banks to not make Finance a constraint.
Along with Financial Inclusion, he mentioned other aims of the PMJDY which are achieving a cashless society, creating a database for all the citizens nation wide and also to minimising the leakages of the Government expenditure on its citizens. He said that the next major challenge is to create credit in all the newly-opened accounts. The RuPay card will help us encourage them to have good savings.
Ashish Chauhan, CEO, Bombay Stock Exchange One of the major role played by the stock markets is to channelise savings of the economy into productive capital. He explained several aspects of Financial Inclusion with regard to the stock market and referred back to the time when telecom industry was trying to increase the mobile penetration. He compared it with the Financial Inclusion ecosystem now and said that a farmer commits suicide because he does not take loans from banks, but from individual moneylenders. This major Financial shift from an informal moneylender to a formal Banking channel is core to the vision of Financial Inclusion and should change. Along with Banking sector, growth in stock markets will also ensure the progress of the country.
Anshula Kant, DMD-Operations, State Bank of India: The leading public sector Bank in India, State Bank of India has been into the mission of Financial Inclusion for over a decade. Elaborating on the current statistics, she said that there are 63,000 business correspondents (BC) in the country, and 80,000 unbanked villages are being covered either through BC or through Bank branches. The BC channel executed a total of 9 crore 43 lakh transactions and the amount of money moved through these BCs is `27,000 crore. She further mentioned that the State Bank of India has been currently working to scale up the Aadhar seeding in the accounts opened under PMJDY.
K Venkatraman, MD and CEO, Karur Vysya Bank: He shared his opinion that economic development has come to India, but it is inadequate in different parts of the country. PMJDY has proved to be a good solution for this.
Shrikant Singh, Principal Secretary, Department of Planning, Government of Maharashtra, presents a bouquet to the Guest of Honour. april - june 2015 | bfsi.eletsonline.com | BFSI
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I, speaks on utive Director, RB ec Ex ty, an oh M Deepak India.' ncial Services in Banking and Fina
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Session 2: Leaders’ Conclave: Innovations in Banking and Financial Services in India K Shivaji, Principal Secretary, Finance (Expenditure), Government of Maharashtra We need to promote invention in India. So, let us move ahead from innovation to invention was the sentiment shared and he added that the same should be seen in the Financial services and Banking technologies segment. He said money is a commodity that connects everyone in all walks of life; however, the concern for Financial services untouchability has been there in a large section of population across India. He was optimistic that technology is one of the assets we can ride on to catalyse Financial sector by scalability, expansion, smarter products. Telecom will deliver wireless connectivity and mobile phones will cut across literacy challenges. Sushil Muhnot, Chairman & Managing Director, Bank of Maharashtra BFSI sector in the last decade has had many incremental innovations. He said that one of the biggest drivers of innovation is competition and second is expectation and needs of the customers. On the recent trends, he said that the important parameters that have moved the economy is that customers now demand convenience in all their transactions and interface with Banking services, which has transformed the Banking services sector in a huge way.
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N Jambunathan, DMD & CIO, State Bank of India: He said, “We are hoping that connectivity platforms in villages will fuel the working of kiosks. Moreover, these will be Adhaar-enabled so that all transactions can be done using the Adhaar framework.” He also opined that in Financial Inclusion, rural ATMs will play an important role. Thus, we need to promote the usage of ATMs in rural areas for small cash needs of the customers. He suggested that the success of Financial Inclusion largely depends on the bank and BC relationship. If there is no sense of partnership and ownership from the Bank's side, then the channel will lose its importance and impact and might not deliver the services in full measure. Abraham Chacko, Executive Director, Federal Bank: The bank has a very strong presence in the State of Kerala and also in other states. Our large network and customer base in one state to execute schemes at the last mile with ease and effectiveness is the biggest advantage we have. He said that in Kerala, we have more than 600 branches and thus it becomes easier for us to execute Financial Inclusion in these states. Today, in terms of technology, all the banks are on the same level. He said, “We should use more of technology, and if we address the challenges of Internet connectivity, WiFi towns and villages is the future.” april - june 2015 | bfsi.eletsonline.com | BFSI
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of session on ‘Role r to star t of the io pr is . n’ da tio e th Na on ices Across Panelists seated & Financial Serv g in nk Ba g in nd pa Technology in Ex
Joseph George Kavalam, Senior Vice President, South Indian Bank: A leading bank in Kerala, South Indian Bank has the advantage of the high literacy rate in the State to promote and market Banking products and services. The advantage of our Bank is the good penetration and customer-centric design of our product portfolio that easily connects with the needs of the urban as well as rural citizen at last mile. The availability of Adhaar is an advantage for authentication and remittances of bank accounts. Thus, we have ensured that account holders have their Adhaar number seeded in the bank accounts. The facility of an overdraft (OD) is much needed by the rural population that is dependent on agriculture as an occupation, so we have adopted villages with OD facilities based on their socio-economic conditions. He said that DBT has been implemented in most of the accounts and hope to go forward on this front and partner with major government schemes ahead.
Key speakers await their turn during ‘Innovations in Banking and Financial Services in India’ session.
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PK Chophla, CGM & CVO, State Bank of memento to Bi Patiala, presen bhuti Kumar Jh ts a a, Country Man East, Singapor ager-India, Mid e and Israel, O dle penIAM LLC.
Session 3: Role of Technology in Expanding Banking & Financial Services Across Nation P K Chophla, CGM and CVO, State Bank of Patiala: He placed his point by stating that technology helped trigger some thoughts and the unbiased nature of technology and its prowess to cut across boundaries makes us realise that growth lies in expanding the horizon rather than just giving subsidies. While explaining how technology triggers creative thinking, he gave example of State Bank of Patiala, that managed to issue 96 per cent of RuPay cards in a very short time period. The performance differentiator was a centralised approach to execute the issuance and distribution information. He said that the Bank could do this because they centralised the uploading of information and issued cards faster rather than letting the Bank branch individually do so. The Bank is trying to use technology to maximise the productivity of Financial services and customer satisfaction. Ms Usha Menon, GM- IT, Central Bank of India: A common thread that connects all bankers is the need of customer awareness, along with literacy of account holders. Apart from Financial literacy, a lot of skill development will help us bring the underprivileged at par with the urban customers. She is of the opinion that if, at present, all the customers are using the services through business correspondents, and we are able to make our own devices which are PIN-enabled, only then the justice will be done to the use of RuPay card. She concluded by saying that the underprivileged are mobile-savvy. So, we should explore that further to achieve success. More exploration of mobile platform for Banking services remains yet to be explored.
Event Report BFSI summit 2015
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Sitaram B Surya, AGM- IT, Dena Bank: A lead Bank that has achieved milestone success in Aadhaar enrolments has been at the forefront of Financial Inclusion. PMJDY is a flagship scheme that has accelerated the mission of inclusion in the country. During the extensive work of the Bank in addressing needs of the last mile customer, he expressed his concerns on use of RuPay cards and the insurance linkage to the accounts opened under PMJDY. He mentioned about USSD which is a program that does not require a smartphone to do mobile baking, but also can function on a normal phone. He expressed the challenge before the Bankers right now is to take this USSD program to each of the account holder, which will empower them to bank from their own mobile phones. Saurabh Kumar, General Manager, Samsung Enterprise Business: A leading technology provider in India, he mentioned about the challenges faced by biometric machines like fingerprint scan, which can differ due to image size and also the lack of connectivity. The bottlenecks of power and connectivity have taken off the pace of work in many areas and continue to hamper pace of many projects in rural areas. He added that at Samsung, the company is trying to take this entire process offline, as well as explore alternate technologies such as use of iris scan technology, which is less space consuming and more efficient. A business correspondent is a key link of banks and customers. He also
mentioned the need of a system which authenticates the real identity of an account holder and minus the change of false identification through BC. Pratip Banerji, Head- BFSI Business, CA Technologies: Mr Pratip talked about how the transactions can go wrong on mobile or any devices and how we need to give confidence to the customers that this can be rectified. Having an error-free system since the development stage will be a great confidence booster in the customers and also a great encouragement. The advantage of a robust technology that is well thought out right from the development stage helps to plan and execute its roll out better, this was mentioned by the leading technology provider in India that is working in partnership with leading banks worldwide. Andreas Goga, Senior Adviser, WebID Solution GmBH: When asked about the risks that come with technology, Mr Andreas Goga said that technology is not a magic that can solve everything and it is easy to search for gaps like it is easy to forge an Identity Card. We can add security layers to the process for taking care of the risks. He raised a point that we can’t expect 100 per cent errorproof transitions as mistakes happen in a Bank branch as well, but we can try quick remedies to resolve them. april - june 2015 | bfsi.eletsonline.com | BFSI
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ent Systems led ‘Digital Paym tit n io ss se e th ring Key speakers du less Economy’. Ahead for a Cash ad Ro – s ce an Remitt
Session 4: Digital Payment System & Remittances – Road Ahead for a Cashless Economy S Ganeshkumar, CGM & In-charge Department of IT, Reserve Bank of India: The BFSI sector is committed to move away from paper. Two decades ago, digital was never in our mind and over the years there has been a major push towards electronic transactions. He said that a lot of products and services have arrived in the ecommerce space and electronic Banking. In recent time, we have the Banking sector and ecommerce industry. Stating some of the initiatives, he said that we have tried to reduce the cheque-clearing efficiency as we want to promote electronic transactions. Even in the government services, we are moving towards electronic tax and electronic payments. The digital movement is on with eCash or mobile wallets and many more. Our vision is to make the payments system safe and easy to use. He also informed that RBI is trying to use mobile for the PMJDY accounts on ways it can be linked to mobile via an interface and Aadhaar for authentication. Vibhu Arya, Head of Strategic Partnerships and Alliances, Snapdeal.com India has more than a billion people with mobile phones and a large section of these have smart phones. It is for Banks and Financial institutions to build and create products
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&
Guests and de legates listen to speakers as th progresses. e session
that are easier to use for the customer. With digitisation of banking products and services, there is a big opportunity to disrupt the market. Elaborating more on their new platform for BFSI sector, he informed that the company is a marketplace of buyers and sellers with close to 100,000 sellers and 50 million customers doing transactions each day. The latest platform called Capital Assist is where bankers, NBFCs and other such organisations can connect to the platform and finance these sellers based on their volume of transactions, ratings, customer experience, turnover etc. This is a new opportunity for banks to embrace and connect to the e-commerce growth story. Aditya Chaugule, Head-Electronic Banking, IndusInd Bank: Interoperability and inclusiveness has been the new vision of RBI and this reflects the entire digitalisation era in the BFSI sector that has been scripted over the years. The future belongs to a less cash economy has always been promoted by the regulator in India. Interoperability of technology and applications with proliferation of payment platforms is quite recent with RTGS and National Payments Corporation of India platforms available. Their NACH and Aadhaar-based payments systems have already started to attract transactions. He opined that concerns of security of citizen’s data and Bank’s data for the bankers will be manifold as the volume of customers and transactions increase. The future will also have the banks addressing the challenge of management of commonality of identity of every customer that banks with them.
Event Report BFSI summit 2015
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Aspy Engineer, President and Country Head-ATM, Yes Bank: With all key technology platforms integrated in their banking ecosystem, he said that the weakest link today in the digital payments ecosystem is the end customer. The IT industry and the bankers are aware of the advantages of the Banking technologies offered. However, there needs to be a major awareness push to ensure the end customer also has knowledge of the products and the services that come bundled in addition to the security issues. With increasing number of frauds, we should ensure that the customer is aware of the privacy issues. Thus, the future will witness the role of mobile banking as a price differentiator. Jayant Bhatia, Head Digital & Payments Initiatives, Standard Chartered Bank: Reasons of the digital payments to take off among customers was the extensive education and awareness drive with them to build trust and security in the mind of the end customer that in whatever way you make a payment, your transaction is secure and encrypted. On the pace of digital payments progress in India, he said the future will depend on how fast the merchants accept electronic payments. Currently, only close to half a million have electronic payments capabilities and have been ignored in digital payment revolution. He suggested that to promote wider use of digital payments across all corners of the country, the key measures should be around making the POS and other payment devices cheap, transaction cost to be lowered, faster settlement of issues. In future, the transaction costs of mobile will continue to be lowest and thus, is the most attractive platform.
Session 5: Financial Inclusion & Role of DBT using Aadhar – Accelerating Banking Services for Every citizen. Ajay Bhushan Pandey, Deputy Director General, UIDAI, Maharashtra: Mr Ajay Bhushan Pandey started moderating this session by stating that Aadhar has crossed 75 crores in a span of four years in India. There are 10 lakh Aadhaar being generated every day. While talk- ing about the complexities behind delivering an Aadhar card, he explained that when a person enrols to get Aadhaar, his bio metric is compared with the bio metrics of 75 crores existing customers and he is given an Aadhaar only when they don’t match. Dipak Naik, President, MEDC: “War is too serious a business to be left for generals,” He initiated by quoting Mr Winston Churchill and drew parallels saying Financial Inclusion is too serious a business to be left to bankers. After giving few other examples, he explained that technology is the only way to bridge the gap we have in our Financial system. He further spoke of how 32 per cent of Maharashtra is yet to be covered under Financial services and expresed hope that this will soon happen because of the excellent work which is done by people at Aadhaar and the banks. april - june 2015 | bfsi.eletsonline.com | BFSI
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curity
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session ‘Phy ior to star t of the pr rs ke ea sp y Ke ctor’. ement in BFSI Se and Risk Manag
Amit Sharma, Special Secretary, Government of Jammu & Kashmir: He spoke about how he has made a proposal to the Government of Jammu and Kashmir to link Aadhar with Permanent Residential Certificate which has been produced by the residents of the State. This proposal will help Aadhaar penetration as well as automate the PRC. He invited the bankers and the other people related to the BFSI sector to J&K, where there is lot of scope for Aadhaar, DBT and other services. He also mentioned how module of Business correspondents will work well in a State like Jammu and Kashmir. Ajit Kumar Rath, GM-IT, Union Bank of India: All Union bank of India branches have the facility of e-KYC with which a person with any piece of paper can go to the bank and get his account details, stated Mr Rath. He explained how Aadhar, NCPI, BC, technology partners and bankers are important in these ecosystems where we are trying to bring in Financial Inclusion. He also spoke about APS which is Aadhaar Payment Systems and pin-based verification transaction making Banking easier. Geetanjali Mishra, GM-Outreach, State Bank of India: According to Geetanjali Mishra, progress of Financial Inclusion is not opening account, but it is dependent on the entire wellbeing of finances of a person or his
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Ashalatha Gov ind, GM & CIS O, State Bank memento to R of India, presen ohit Shukla, C ts a SO, IDBI Bank .
family. Along with bank accounts, this will provide the underprivileged people with facilities like saving, DBT, pension and loan facilities. The banking sector having opened 12 and half crore accounts has just opened doors for all the above-mentioned aims. She concluded by saying that despite R. K Lakshman not being around, the common man rips the benefits. Session 6: Physical and Cyber Security and Risk Management in BFSI Sector Ashalatha Govind, GM & Chief Information Security Officer, State Bank of India There are threats and risks of going digital for banks. Doing a balancing act is a daunting task, says the information security guardian of the largest public sector Bank in India. Mobile devices and Banking technologies that are here to stay, she added, and said that as Financial Inclusion has its foundation on mobile devices such as hand held mobile phones and Point of Sale (PoS) machines that help banks reach the last mile customers, the urgency to increase customer awareness is the need of the hour. On the view of changing role of a Chief Information Security Officer, she said that most of the time we are held at the helm of holding business at the point of security and risks. However, it is the organisation's safety that is in our mind and we are always looking at best ways to minimise risk in the ever changing technology environment.
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Event Report bfsi summit 2015
nk of Mahacurity Officer, Ba Se n io at rm fo In Chief V D Kolhatkar, e Summit. s his views at th se es pr ex rashtra,
Ruchin Kumar addresses the issue of cyber session ‘Physi security during cal & Cyber Se the curity and Risk BFSI Sector’. Management in
Tapan Kumar Panda, Chief Information Security Officer, Andhra Bank: With more platforms for customers to connect with the bank, it becomes tough to be on high alert 24X7. The way the trend is going on in Banking technology, it is sure that in near future all efforts will be to take the bank to the customer. As most of these solutions are in the hands of the customer, they are going to use them anytime, anywhere. For example, he cited that as part of the Jan Dhan Yojna, we have distributed 14 lakh ATM cards, but we don't know how these ATM cards will be used by these customers. He suggested that in the rural and low-literacy areas, biometric authentication is the best way forward. He concluded that as CISO, we have to ensure that the comfort of the customers is maintained. Manish Paul, Head, Information Risk Management, HDFC Bank: Managing the threat is our major task. We should plug-in the vulnerabilities in the first place. We may have new applications coming each day and the way these technologies are interacting with the customers is changing rapidly, the most recent being the e-wallet. He suggested for a community-level organisational change where CISO build a layer of risk management within Banks and first layer of defence and depth should be done for risk in all the organisations. We need to have framework and specialists of the sector to keep up with risks, he added.
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Ruchin Kumar, Security Evangelist-India & SAARC, Safenet: Technology is changing each day and it is difficult to keep up with the trend and manage a security wall around it. With the introduction of Cloud technology, virtualisation is a major benefit that one can use limited resources in banks for the vast number of applications with ease. The power of virtualisation allows banks to host applications of 20 servers that can now be hosted on a single hardware, saving the cost on infrastructure and licenses. However, there are security challenges. One needs to be ready with the checklist of agreement details for all security functions and controls over data management and data ownership concerns. He concluded that SLAs should be defined and it will help banks go an extra mile by providing data confidentiality to its customers using technology of cloud in the BFSI sector. V N Jadhav, DIG Police, Maharashtra State Security Corporation: We are responsible for the physical security of Financial institutions. These include ATMs, currency chests, monorail, metro rail and other important places. He said that in the current scenario, we know that the State police is overburderned and to reduce that burden, we have started this corporation since 2010. Today, our manpower strength stands close to 2000 guards which are well trained. He invited all to seek their services and
Event Report BFSI summit 2015
chin Kumar.
ts listen to Ru ants and panelis
Particip
informed that a simple registration process and a joint audit are conducted before the agreement and only after that our guards are deployed. We are a government undertaking and play an important role in addressing the security challenges of the BFSI sector. Rohit Shukla, Chief Security Officer, IDBI Bank: There is a need to have threat perception and threat analysis done by each bank that detail out all the potential risks, which might endanger the bank assets. He added that this should be followed by security architecture to address all risks of the banks in a holistic way. The scope of physical security includes ATMs, bank premises as well as currency chest. The cash stored in each currency chest services 32 bank branches for day-to-day cash requirements. This movement of cash from currency chest to banks is the requirment and we need to protect this cash while it is stored and is in transit. In conclusion, he said that complete security solutions need to be addressed and piecemeal solutions do not seem to work in ensuring physical security for BFSI sector. V D Kolhatkar, Chief Information Security Officer, Bank of Maharashtra: The Bank, due to its large presence across the State, has a unique mix of urban and rural population as its customers and hence needs to be at the forefront of technology. It yet ensures that
Key speakers pose for a grou p photograph sion on cyber at the end of th security. e ses-
needs of the rural and marginalised are not compromised. He said that technologies have been adopted by banks across India and today the banks have preparation levels that are at par with the best in the world. He reiterated the concern of lack of awareness and called for collective action by creating a consortium of experts that will assist banks, vendors and end customers to be safe and secure. To be much ahead of the threats, he suggested that India should build some type of laboratories to test various hardware, software and networking solutions that are coming in India much before they are implemented. A robust authority to certify the safety of product and solution is much needed as most of the solutions that come are imported devices.
A view of the gathering at BFSI Leadership Summit 2015. april - june 2015 | bfsi.eletsonline.com | BFSI
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Ltd, presents perative Bank oo C ed at ci so EO, As M N Smar t, C s. his view
Chetna Sinha, Founder and Chairperson of Cooperative Ba Man-Mahila D nk, presents a esi memento to S Secretary, Coo K Sharma, Prin peration Depar cipal tment, Govt of Maharashtra.
Session 7: Banking and Insurance for Rural and Urban Poor Chetna Sinha, Founder/Chair, Man Mahila Desi Cooperative Bank: Ms Chetna Sinha expressed that we don’t need zero balance accounts for the poor and the poor wants to create value. She further narrated her experience with people who told her why they don’t want to come to banks and prefer a moneylender. She mentioned that we need to design a product for the customer and we deliver it as per his needs, which will bring confidence in them. Sanjay Silas, EVP, Axis Bank: We will not be able to reach to the person at the last mile through BC. Thus, we need technology for that. He mentioned a programme that Axis Bank is developing, through which Financial Inclusion drive for the poor can be a business module for the banks. Narendra Behere, CEO, Greater Bank: He threw light on how Financial Inclusion has been a major focus since last 100 years in Co-operative Banking sector even before the PMJDY, as compared to the commercial banks. He mentioned that Co-operative Banking is popular in five states and needs to grow beyond that, which will be a great help in Financial Inclusion as these banks cater to lower class and marginalised cliental. Co-operative Banks have already excelled in KYC as the staff of the banks are locals and can easily connect to the customers and explaining them terms in local languages thus bringing in personal touch and confidence of the customer.
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M N Smart, CEO, Associate Bank: Mr M N Smart represented a Co-operative Bank in Surat, Gujarat. He explained how important the Financial Inclusion of the urban poor is with regard to his city, as it has a lot of business potential. He explained the schemes of his Bank, which provide insurance cover to the loan takers, along with other schemes. Dr Subrata Das, Director, Maharashtra Remote Sensing Application Center: He explained what exactly mobile remote sensing devices are and how they help in shifting our attention to the areas which will need attention. He also explained the project which has been developed by the State of Maharashtra called Maharashtra One Database, and can be accessed by a click of a button. S K Sharma, Principal Secretary Co-operation Department, Government of Maharashtra: He spoke about the merits of the Co-operative Banking and the good numbers, which are working in Co-operative Bank. He advised to make a special effort to win confidence of the customer so that they stop going to moneylenders. He concluded by saying that the Co-operative Banks should more aggressively follow the opening of accounts and distribution of RuPay card.
Event Report BFSI summit 2015
Awardees at the ‘Elets BFSI Leadership Summit & Awards 2015’ pose for a group photograph
Key Takeaways During the course of day-long deliberations at BFSI Leadership Summit & Awards 2015, a number of suggestions and recommendations were made by the speakers and stakeholders associated with the banking, finance and insurance ecosystem. The suggestions, if implemented judiciously, can go a long way in boosting the prospects of the sector. For the benefit of readers, we reproduce the compiled key recommendations and observations below: l Technology is must to catalyse finance sector through scalability, expansion and smarter products. l There is a need for convergence of services and financial products with insurance, banking and other products. l Technology has to be an enabler to sync all products and services for the citizens. l Convergence of services should be ensured at a click of the mouse. l BFSI can be utilised for poverty alleviation. l As mobile density has gone up, hopes raise that mobility will play a crucial role in the BFSI sector. l Challenges of interoperability need to be addressed. l Once payments banks pick up, they will give a big push to the payments segment. l Aadhaar number should be seeded with accounts; it will be the key to individual account holders. l Instead of PIN, biometrics should be used for transactions. It will facilitate banking services at the last mile.
l UBS, BC, Aadhaar-enabled mechanisms or payment banks — anything that brings down costs will go a long way in promoting Financial Inclusion. l There is a need to promote usage of ATMs in rural areas for small cash needs of the customers. l Better upkeep of ATMs to keep those in working condition is a must. l Without financial literacy, the last mile will remain cut off from financial services. l Financial ecosystem (banks, post offices, payments banks, etc) need to work in tandem. l Further innovations in and a little tweaking of technology can make services faster at lesser costs. l New generation banking and credit relevance is the need of the hour. l Most of the customers under PMJDY are mobile-savvy; it should, therefore, be used to provide them financial services. l Instead of business correspondents, we should prefer APRIL - JUNE 2015 | bfsi.eletsonline.com | BFSI
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Event Report bfsi summit 2015 pin-enabled devices to provide customers easier access to financial services. l Training programmes must be undertaken at regular intervals not just for financial literacy, but also to inform people about how to use devices like Micro-ATM and RuPay cards. This will compensate for the need to have physical branches everywhere. l Technology like iris detection and voice recognition can be used for identification, which are error free and more efficient. l Push towards e-transactions and digital transactions is the way forward. l There is a need to reduce cheque clearing efficiency and promote electronic transactions. l Shift towards electronic tax and e-payment for the government services is a must. l Younger customer is tech-savvy and needs mobileenabled banking services, but it needs to be secure. l Mobile becomes the key in Financial Inclusion and payment systems as a billion mobile connections and 650 million unique mobile users are present across the country. l Mobile applications will also give a video interaction with the customer care representative. l The weakest link in the payments ecosystem is the endcustomer; we have to make him aware of the products and services that come bundled. l Every individual with a mobile phone or tab in his hand is a potential customer for the bank. l Banks need to address the basic requirements and make it easy for any mobile customer to do banking on the device. l The cost of mobile transaction is very less. Per transaction cost in a branch is around `45, ATM transaction `18, online `4 and mobile transaction comes even below that. l Incentives like tax concessions can be given to the customer for electronic transactions. l Banks should look at low-cost models of servicing customers. It will reduce the costs for banks, as also the overall cost. l We need to consider the needs and capabilities of merchants today. The future will depend on how fast the merchants accept electronic payments. Only half a million currently have electronic payment capability. l The process of card issuance must be expedited, as 45-50 per cent cards are yet to be issued. l BC channel is also very effective as not all customers are comfortable with ATM branches. l BCs assist in Aadhaar-based and biometric transactions. Bankers are also trying to use micro-ATM and PIN, so it will be helpful.
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l In the rural and low-literacy areas, biometric authentication is the best way forward. l Interoperability and inclusiveness is the new vision of RBI for a less cash economy. l Interoperability of platforms and their accessibility to the last mile is crucial. l Security should be made such that it is easy for the customer to understand and practise. l Mobile technology will be the future mode of customer connect and robust security solutions around mobile should be collectively looked at. l Customer awareness is a big challenge, therefore, innovative ways to educate the customers should be undertaken. l There should be some kind of laboratory to test various hardware, software and networking solutions before their implementation. l Analysis of attempts either successful or failure is important. This will help make systems better. l Vulnerabilities must be plugged in the first place. New applications are coming every day, the most recent being the e-wallet, and the way customers interact with them is changing rapidly. There should be a proactive vulnerability alert mechanism for banks. l Risk management in BFSI cannot be by point solutions; a holistic approach is required. l Risk management framework should be dynamic with technology changes to meet the requirements of the businesses and provide best services to the customer. l Virtualisation is a benefit, as one can use limited resources for a vast number of applications. l Service Level Agreements (SLAs) should be defined and go extra mile by providing data confidentiality using cloud technology. l There is a need to have threat perception and threat analysis done by each bank that can endanger the bank assets. Security architecture should be holistic to address all risks of the banks. l A blended approach in physical security of manpower and technology is required. l Cooperative is majorly present in only five states. For the growth of urban poor and to achieve financial inclusion, cooperative banks should be promoted. l Co-operative banks should aggressively follow the opening of accounts and distribution of RuPay cards. l Along with control and supervision, the regulators and the government should adopt support cooperative banks. l The component of overdraft facility in PMJDY is highly favoured among the poor. l Banks should design customer-oriented products and arrange to get those delivered fast and conveniently. ď Ž