incidentally, but significantly, was also the case, in the recent global financial crisis, with large global banks. besides, in india, unlike a company, shareholders / members of a ucb, are generally the debtors of the bank. while this would be an appropriate framework for governance for a cooperative society, which accepts deposits only from members / shareholders, it leads to distortion in the business model when applied to a cooperative bank, which solicits deposits from non - members as well. as majority of the share holders are borrowers in ucbs, the elected management would have an incentive to pursue policies which are more borrower oriented that may not always be in the best interests of depositors. also, unlike in the case of companies, the shares of which are listed on a stock exchange and can change hands without affecting the capital base, in the case of ucbs, the shareholders can withdraw their contribution to capital and shrink the capital of the bank and thereby limit its ability to increase risk weighted assets and expand business. response strategy keeping in view the characteristics of the ucb sector, reserve bank initiated a series of measures to resolve the structural problems and strengthen the banks. in what follows, i set out the initiatives of the reserve bank in dealing with the crisis. a. withholding of new bank and branch licenses licensing norms for ucbs were eased in may 1993 and within 8 years i. e. by june 2004, more than 800 banks mushroomed and close to one third of these newly licensed ucbs became financially weak within a short period of 2 - 3 years. there was, thus, a need to moderate the pace of growth of this sector and it was, therefore, decided in june 2004 to stop issue of licenses for new banks and branches until a suitable framework for regulation and supervision was in place for the already large number of ucbs. b. vision document for ucbs recognizing the systemic risk concerns, reserve bank reviewed the entire gamut of legislative, regulatory and supervisory framework for these banks, and in march 2005, brought out a draft “ vision document for ucbs ”. the vision document, discussed the characteristics of the sector, analyzed the problems afflicting the banks and proposed the following regulatory and supervisory strategies for dealing with the problems affecting the sector : a ) nuanced and granular approach to supervision and regulation highlighting the heterogeneity of the sector, the vision document observed that the “ one size fits all ” approach to regulation and supervision of uc

13. bis central bankers ’ speeches • sector - wise contribution to nsdp across the above mentioned three sectors are furnished in the following chart 9. • services sector constituted the highest share in total nsdp of ner followed by agriculture and industry. except for a few years, the share of services sector in total nsdp of ner increased steadily while the share of agriculture declined and that of industry showed mixed trends. section 4 role of governments in providing necessary conditions for growth the role of governments in the following areas would be paramount in providing the necessary conditions for growth, so as to enable the financial system to further galvanise their efforts for development of ner. security : many committees found that security is the most important factor which impedes growth of banking sector in ner. therefore, there is an imperative need to ensure security in the region. infrastructure facilities : for up - scaling financial inclusion efforts, adequate infrastructure facilities such as digital and physical connectivity, uninterrupted power supply etc., are prerequisites. under developed rural areas : it was observed from the banking development indicators viz., number of bank branches, growth in bank credit and deposits of rural ner have been witnessing decelerated trends in the recent years. as mentioned earlier, around 80 per cent of total ne population reside in rural areas. there is an imperative need to have a “ special plan ” to effectively address the specific issues pertaining to rural areas of ner to provide a fillip to the growth in the area. savings and investment : it is widely held that for long - term economic growth, increase in savings and investments are vital. planning commission, for 12th plan period, estimated state - wise and sector - wise rates of investment ( gross capital formation as a % to gdp ) for ner ( table 8 )., the estimated investment rate for ner is reasonably good and is comparable with national average. however, on examining the savings ( i. e., only bank deposits for which data is available ) of ner, it was observed that there is deceleration in bank deposits since march 2006. for rapid development of ner, state governments and financial sector regulators should work together in enhancing investment and savings in the region, which may in turn boost the levels of growth. bis central bankers ’ speeches section 5 role of financial sector in spurring growth and expanding financial inclusion given the ground - level position as identified, the role of financial institutions in spurring growth sector - wise and