##y in terms of size, geographical distribution, performance, financial strength as also in the it and human resources endowment of the ucbs. while on the one hand, there are a number of small neighbourhood unit banks functioning for mutual interest of their members, there are several large ucbs with a wide network of branches, large number of depositors and borrowers on the other, many of whom are medium / large corporates. in the latter, while the cooperative structure exists only as an organizational arrangement, their business model and goals are more like commercial banks. the extent of heterogeneity can be gauged by the fact that 30. 7 % of the ucbs hold only 2. 2 % of deposits while at the top end, only 16 banks account for 28. 8 % of the total deposits of the sector. incidentally, despite the differences in size, a “ one size fits all ” approach to regulation and supervision existed with all ucbs being subjected to the same regulatory and supervisory framework as it was for commercial banks. c. dual control another feature of the ucb sector in india is the duality of control. ucbs are regulated and supervised by both the state governments, through the registrars of co - operative societies, and by the reserve bank of india. while the state registrars exercise powers with regard to incorporation, registration, management, amalgamation, reconstruction or liquidation, in the case of banks having presence in more than one state, the central registrar of co - operative societies, on behalf of the central government, exercises such powers. the banking related functions such as issue of license to start new banks, or branches, matters relating to interest rates, policies on loans and investments, prudential norms etc. are regulated and supervised by the reserve bank of india. it was often our experience that the effectiveness of regulatory and supervisory measures got diluted because of inadequate response from state government. reserve bank ’ s requisition to state government to supersede the board of a bank, for example, would get acted upon with inordinate delay by the registrar of cooperative societies, in case the state government did not share rbi ’ s perception about the competence of the board. there was thus no doubt that this was another issue which needed to be addressed as part of the strategy for effectively handling the crisis in the sector. d. business model – corporate governance issues most of the problems faced by the sector arose from lack of good governance in ucbs, as indeed,

of ucbs. tafcub was tasked with the responsibility of identifying the potentially viable and non viable ucbs in the state and providing a revival plan for the former, and a non disruptive exit route for the latter, set of banks. the exit route could include merger / amalgamation with stronger banks, conversion into societies, or ultimately, only as a last resort, through liquidation. based on recommendations of tafcubs, supervisory actions that have been initiated include merger of unviable banks with financially strong ucbs, cancellation of license of unviable banks and rejection of license applications of unlicensed cooperative banks, which were being allowed to conduct banking business pending rejection of license application by rbi, as per the banking regulation act, 1949 ( as applicable to cooperative societies ( aacs ). significantly, the number of unlicensed banks dramatically dropped from 1066 in 1977 to a mere 58 as of date! the access to consolidated information from local and national level federations of the banks, as also from the regulators and supervisors, made tafcub an effective instrument for consolidating the sector through quick and non - disruptive exit of unviable banks and revival of the viable ones. as recommendations of the tafcubs, had the consent of all stakeholders including the reserve bank of india, they lent themselves to speedy implementation by all concerned. the first tafcub was set up in june 2005 and its success in taking of difficult decisions in a transparent manner and the consequent turning around of banks, has led to its adoption practically in all the states. c ) information technology as part of the mou signed with the states, rbi committed itself to facilitating it and human resources development initiatives in ucbs. on the technology front, a beginning was made by rbi with the development of software that facilitates compilation and submission of all supervisory and regulatory returns by ucbs to rbi, electronically. the software also allows banks to analyse their own data and it is, therefore, being used as a powerful management information tool by many banks. the data submitted by banks are subjected to analysis by supervisors, inter alia, with the objective of tracking incipient stress faced by banks as also for identifying outlier banks. this off - site surveillance mechanism also acts as a decision support system, as data presented in an analysed form facilitates informed decision - making in addition to facilitating a technology - driven system for focussed and continuous supervision of ucbs, which was one of the