Co-operatives - "The Elephant that can dance"...

“The co-operative sector is not irrelevant even today and the future of the sector is very bright.?The co-operative movement is the only economic model, where the smallest person can contribute to the development of the country”

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These were some key remarks made by the Hon’ble Home and Co-operative Minister Shri Amit Shah ji, as he delivered a key note address at The Lakshmanrao Inamdar Memorial Lecture ceremony, on 23rd September, 2023, in Mumbai at University of Mumbai.

If we carefully unpeel the subject highlighted by the Hon’ble Home and Co-operative Minister, we understand the potential of the co-operative sector. Bharat has seen a golden era of co-operative movement and many successful co-operative models. Lijjat, Amul, IFFCO etc., are among the world’s top co-operative models, and benchmarks for the co-operative community globally. However, due to the political gains and ill motives of some of the co-operative sector participants, the entire sector has suffered. Now the Co-operative Ministry has been formed under the leadership of Shri Amit Shah ji and the co-operative sector is again gaining momentum. I do?believe?that It will regain its old glory soon.

For some baselining, let’s first look at the financial institutions in co-operative sector, as they affect the economy directly and also the wider impact on economy.

The entire span of the co-operative movement can be summarized?as

- evolution of co-operative sector, - gaining momentum and attaining glory - becoming a very successful sector - slowdown due to political intentions of a handful of co-operators - now again aspiring to attain its glory.

There are certain critical internal factors, which are pulling down the momentum of this sector. If we deep-dive into these internal factors, we will get some alarming signals, and which need urgent attention.

- People play crucial role in success or failure of any organization. Unwillingness or rigidity to change, affects the growth of any organization. The stakeholders involved in the co-operative sector banks are Board of Directors, Top Management in executive capacity, middle and lower-level staff, and the customers. The current set of people, working in co-operative banking sector are between age group of 50 years to 60 years. They are not willing to adapt to any changes. Considerable time and energy needs to be spent on training these people. A newer way of doing business, processing, technology, products etc. are the need of the hour and the people working in co-operative banks presently lack these aspects. There is need to? train them on newer products, processes, technology, methods, customer service mechanisms and management tools.

Contrastingly, the Private, Small Finance and Payment banks attract relatively younger talent between age group of 25 years to 40 years and score points on all these counts.And consequently they are real tough competitors for the co-operative banks.

- Processes are the key to efficiency and effectiveness. Non-adherence leads to lot of non-value-adds and makes things non-viable. Generally, banks spend lot of money on technology. A study says that around 53% amount is spent on hardware, 44% amount spent on software and 3% is spent on training. Banks don’t spent money on processes or process re-engineering. Actually, spending money only on technology will not bring the kind of results, which are expected. Amount spent on process re-engineering will bring greater results like TAT reduction, quality improvement, cost optimization and will enhance customer satisfaction.

- Technology is no more a matter of comfort or luxury, but it has become a necessity for banking. Use of right technology is critical to quality and cost. It is observed that banks (mainly Cooperative?Banks) purchase high-end technology, without actually understanding the exact use of it. Not enough investments are made on people, training etc. Consequently, technology purchased becomes obsolete and the amount spent on technology merely brings hardly any tangible benefits. Banks spent huge amount of money on technology, however the time taken to sanction any loan still leaves a lot to be desired.?

We generally observe that banks take a lot of precautions, while disbursing any loan. Lot of information is gathered about the customer, who applies for the loan. When a bank takes so much precaution while disbursing the loan of INR 2 – 3 crores, can we imagine the thought process that goes behind the purchase of technology? And yet, merely the purchase of relevant technology will not bring the desired results ; Right usage will be the key.?

The Hon’ble Minister has also spoken about transformation of PACS (Primary Agricultural Co-operative Societies). The vision is that revolutionary steps will be taken for transformation of these PACS. At district and tehsil level, PACS will deliver major products and services and to achieve this, complete digitization is being undertaken. However, the points mentioned above are critical from PACS perspective also.

Unless and until institutions like co-operative banks, co-operative credit societies and PACS, work on the above-mentioned areas, it will not bring in desired results.

It may be important for the co-operative ministry to give directives to these organizations to work on these areas and monitor them for better co-operative sector growth.

And then we can say that the proverbial elephant is ready to dance...?