Unit 3: DCCB & SCB

Introduction to DCCB & SCB

The cooperative credit structure in India is three-tier (for short-term credit):

• State Cooperative Bank (SCB) → Apex (Top level)
• District Central Cooperative Bank (DCCB) → Middle level
• PACS (Primary Agricultural Credit Societies) → Village level

Significance of DCCBs and SCBs in Short-Term (ST) Cooperative Credit

Why are they important?

• They form the backbone of rural credit
• Provide crop loans and working capital to farmers through PACS
• Act as a link between State Cooperative Banks and PACS
• Support agricultural development and rural economy
• Provide refinance, training, support, and supervision
• Help in implementing government schemes like KCC, crop insurance

Constitution and Working of SCB & DCCB

A. State Cooperative Bank (SCB)

Constitution:

• Registered under the State Cooperative Societies Act

Owned by:

• District Central Cooperative Banks
• State Government (minor share)
• Other cooperatives

Managed by:

• Board of Directors
• Chairman
• CEO/Managing Director

Working:

• Apex bank for all cooperative banks in the state
• Receives funds from RBI/NABARD
• Provides refinance to DCCBs
• Issues guidelines, policies, and supervises DCCBs’ financial health

B. District Central Cooperative Bank (DCCB)

Constitution

• Registered as a cooperative society at the district level

Members include:

• PACS
• District-level cooperatives
• Individual members
• State Government (minor share)

• Managed by a Board, Chairman, and CEO

Working:

• Acts as a link between SCB and PACS
• Provides funds/loans to PACS for lending to farmers
• Mobilizes deposits from rural areas
• Provides banking facilities to farmers, traders, and rural people

Mobilization of Deposits

Both SCB and DCCB collect deposits to meet financial needs.

Types of Deposits Mobilized

• Savings deposits
• Current accounts
• Fixed deposits (FD)
• Recurring deposits (RD)
• Special Deposits from institutions

Importance of Deposit Mobilization

• Build financial strength
• Reduce dependence on external borrowing
• Improve liquidity
• Support lending operations
• Generate income through interest spread

Lending Operations

A. SCB Lending

SCB mainly lends to:

• DCCBs
• State-level cooperatives
• Government agencies
• Marketing cooperatives

B. DCCB Lending

DCCB lends to:

• PACS (major)
• SHGs
• Individuals
• Farmers, traders, rural businesses

Types of Loans

• Short-term loans (crop loans)
• Medium-term loans (equipment, irrigation)
• Consumer loans
• Dairy and poultry loans
• Loans under government schemes

Loan Process

1. PACS collects farmer demand
2. DCCB approves and disburses through PACS
3. Farmers repay after harvest
4. PACS repays DCCB

Overdues and NPAs in DCCBs and SCBs

Meaning

• Overdues = Loan not repaid on the due date
• NPA (Non-Performing Asset) = Loan overdue for more than 90 days

Causes of Overdues & NPAs

• Crop failure
• Natural calamities
• Poor PACS recovery
• Political interference
• Weak appraisal of loans
• Willful defaulters
• Poor financial discipline

Effects

• Weak financial health of banks
• Loss of income
• Reduced lending capacity
• Dependence on government for support

Measures to Reduce NPAs

• Credit–marketing linkage
• Digital recovery systems
• Crop insurance
• Professional loan appraisal
• Strict follow-up and recovery drives
• Training for PACS managers

Apex Banks

What is an Apex Bank?

An apex bank is the highest-level cooperative bank in the state or country.

Examples

• SCB → Apex at the state level
• NABARD → Apex for agricultural credit at the national level

Functions of Apex Banks

• Provide overall guidance to cooperative banks
• Ensure proper financial discipline
• Channelize funds from RBI/NABARD
• Monitor DCCB performance
• Provide audit, training, and supervision
• Formulate credit policies
• Represent state cooperative banks at national level

Summary Table

Topic	Key Points
SCB	Apex bank, supervises DCCBs, receives funds from NABARD
DCCB	District-level bank, lends to PACS, mobilizes deposits
Significance	Backbone of rural credit, supports farmers
Deposits	Savings, current, FD, RD
Lending	Crop loans, MT loans, dairy, poultry, SHG
Overdues/NPA	Caused by poor recovery, crop failure, weak appraisal
Apex Banks	Provide leadership, funding, supervision

National Federation of State Cooperative Banks (NAFSCOB)

(a) Meaning

NAFSCOB = National-level apex federation of all State Cooperative Banks (SCBs) in India.
It represents, supports, and strengthens the short-term cooperative credit structure.

Constitution of NAFSCOB

(a) Formation

• Established in 1964.
• Registered under the Multi-State Cooperative Societies Act.
• Headquarters: Mumbai.

(b) Members

• State Cooperative Banks (SCBs) from all states and union territories.
• Associate members: training institutions, cooperative federations, and banks working in agriculture finance.

(c) Governing Structure

General Body

• Highest authority; includes representatives from all SCBs.
• Meets annually.

Board of Directors

• Elected representatives of member SCBs.
• Responsible for major policy decisions.

Chairman & Vice-Chairman

• Elected from among members.

Managing Director/CEO

• Executes day-to-day operations, administration, and coordination.

Working of NAFSCOB

(a) Key Functions

1. Policy Advocacy

• Represents cooperative banks to RBI, NABARD, Government of India.
• Suggests reforms for cooperative banking.

2. Coordination

• Ensures coordination among State Cooperative Banks (SCBs) and District Central Cooperative Banks (DCCBs).

3. Training & Capacity Building

• Organizes workshops, seminars, training programmes for improving banking efficiency.

4. Research & Publication

• Publishes reports, surveys, and performance reviews of cooperative banks.

5. Data Collection

• Collects financial and operational data from SCBs & DCCBs for national-level reporting.

6. Promotion of Best Practices

• Helps banks adopt modern banking practices like digital banking, core banking, risk management.

7. Support to STCCS (Short-Term Cooperative Credit Structure)

• Strengthens the 3-tier structure:
  SCB → DCCB → PACS

8. Liaison with NABARD

• Works closely for refinance, credit policy, and monitoring of cooperative banks.

Latest Developments in Cooperative Banking

(a) Digital Transformation

• Integration of Core Banking Solution (CBS) in SCBs and DCCBs.
• Digital payment systems like NEFT, RTGS, IMPS, UPI adopted widely.
• Mobile banking and internet banking facilities implemented.

(b) Implementation of Prudential Norms

• Cooperative banks are adopting NPA norms, CRAR, and risk management practices as per RBI/NABARD guidelines.

(c) Strengthening Cooperative Governance

Post 97th Constitutional Amendment, more focus on:

• professional board members
• democratic elections
• transparency and accountability

(d) Revival Packages

• Vaidyanathan Committee recommendations implemented for revamping ST and LT cooperative credit structures.
• Financial support from Central & State Governments.

(e) Amendments to MSCS Act, 2002

• Stricter compliance requirements.
• Improved governance and auditing standards.

(f) Increased Supervision by RBI

• RBI now directly regulates Urban Cooperative Banks (UCBs).
• Joint regulation model (RBI + Government).

(g) Formation of Ministry of Cooperation (2021)

• Separate ministry created to strengthen cooperative movement.
• Aim: “Sahakar se Samriddhi” (Prosperity through Cooperation).

(h) Focus on PACS Modernization

• PACS computerization project with government funding.

Linking PACS with:

• banking services
• storage & warehousing
• digital payments
• FPO activities

(i) Expansion of Cooperative Products

Cooperative banks now focus on:

• Microfinance
• SHG financing
• Digital Kisan Credit Cards
• Agri-startups support