regional rural banks. the dccbs were not allocated any villages despite the fact that a large chunk of rural population held their bank accounts in dccb and scb branches. one reason is that these banks are not sufficiently technology - enabled to participate in the technology driven financial inclusion programme. to redress this handicap, as part of its mandate of institutional development, nabard has embarked on an ambitious effort to bring the cooperative banks on a common technology platform in a phased manner. they should then be ready to be integrated into the fip provided there is also an improvement in their financial health. bis central bankers ’ speeches reviving the cooperative structure – what needs to be done? 28. if the inherent advantages of cooperatives as member - owned and operated entities is to be realized and they are to play a meaningful and sustained role in financial inclusion, many of the above constraints and handicaps will need to be urgently addressed. let me briefly outline the agenda in this regard. improve professionalism in governance / management 29. governance in cooperative banks lacks professionalism. there is need to professionalize both the governance structure and the functioning of these institutions. first, governance has to be segregated from management. the board must restrict its role to governance and allow the ceo and the senior management to manage the day to day operations of these entities. the board can exercise oversight over the management through established channels like reviews in board meetings and by seeking progress reports and information. there is also a need for stringently applying the “ fit and proper ” criteria to personnel considered for managerial positions in these institutions. address poor financial status 30. the deteriorating financial position of unlicensed cooperative banks is an issue of concern. of the 402 cooperative rural cooperative banks in the country as on march 31, 2009, 313 were unlicenced. in accordance with the recommendations of the committee of india ’ s financial sector assessment ( cfsa ), the reserve bank decided that no unlicenced cooperative bank will be allowed to function in the country after march 31, 2012. after this, rbi and nabard worked closely with the cooperative banks and licensed 272 of them, in some cases by relaxing the licencing norms. 31. as on april 1, 2012, there still remained 41 cooperative banks which could not meet even the relaxed licencing norms. in order to maintain the integrity of the cooperative system and to protect public interest, the reserve bank imposed directions on these 41 banks prohibiting them from accepting fresh deposits. i must mention here

policy rather than as a broad based bottom - up movement. 48. i then reflected on the several infirmities of the indian cooperative sector, but argued that despite these infirmities, cooperatives have played a vital role in furthering financial inclusion. i then moved on to listing the main issues concerning the cooperative sector that we must address in order to revitalize it. finally, i raised five questions relating to the cooperative sector on the way forward that must engage the attention of this conference. 49. as i come to a close, i realize that i have been more cynical than i actually want to be. perhaps i should correct that. the cooperative ethic is unexceptionable. it has been and can be a powerful instrumentality for enfranchising the poor and the less privileged. indeed, there are numerous instances from around the world, and from india too, of successful bis central bankers ’ speeches cooperatives. yet for a variety of reasons, both financial and governance related, the credibility of cooperatives has got eroded, especially since cooperatives have come under the spell of several infirmities, some of them chronic. yet, it is possible to cure these infirmities and revive the cooperative structure into health and vibrancy. indeed this is not a matter of choice, but an imperative if we are to achieve our collective aspiration for inclusive growth. i hope this conference will help us find a way forward in this regard. my best wishes for the success of this conference. bis central bankers ’ speeches