Co-operative banks: an important constituent of the Indian Financial System

Financial management refers to the efficient and effective management of money (funds) in such a manner as to accomplish the objectives of the organization. It is the specialized function directly associated with the top management

Objectives of Financial Management

The financial management is generally concerned with procurement, allocation and control of financial resources of a concern. The objectives can be-

1.     To ensure regular and adequate supply of funds to the concern.

2.     To ensure adequate returns to the shareholders this will depend upon the earning capacity, market price of the share, expectations of the shareholders.

3.     To ensure optimum funds utilization. Once the funds are procured, they should be utilized in maximum possible way at least cost.

4.     To ensure safety on investment, i.e. funds should be invested in safe ventures so that adequate rate of return can be achieved.

5.     To plan a sound capital structure there should be sound and fair composition of capital so that a balance is maintained between debt and equity capital.

Co-operative banks are an important constituent of the Indian Financial System, judging by the role assigned to them, the expectations they are supposed to fulfill, their number, and the number of offices they operate. The co-operative movement originated in the West, but the importance that such banks have assumed in India is rarely paralleled anywhere else in the world. Their role in rural financing continues to be important even today, and their business in the urban areas also has increased in recent years mainly due to the sharp increase in the number of primary co-operative banks.

The Co-operative banks have been established under Cooperative Societies Acts of different states. The co-operative movement was started in 1904 with a view to provide financial assistance to agricultural sector. Co-operative Banking Sector, though the oldest in the Banking Sector, it is one of the weakest segments of Indian Banking System. Both the Reserve Bank of India and the National Bank for Agricultural and Rural Development have taken various policy measures in respect of Urban Co-operative Banks and Rural Credit Co-operatives during the recent years to transform them into financially sound entities.

About Author: The author of this blog has done research on bpo, business solutions, customer service, outsourcing.