Restructuring rural credit co-operative institutions

This paper argues Sor a total revamping of the rural credit system and not cosmetic changes. The aim should be the satisfaction of the ultimate borrower at minimum cost. Cost reduction per unit of business can be achieved by integration of short- and long-term wings, rationalisation of co-operative structure by removing one of the tiers, exploiting scope and scale economies available in rural lending. The limitations of the co-operative system such as inability to offer all types of financial services that commercial banks/RRBs do such as money transfer, restricted area of operation and activities, inability to cater to credit needs for all purposes from a single outlet, low level of professionalisation, etc, have to be overcome. Real success comes when co-operatives take full advantage of their ability to have close interface with the clientele. This ability almost matches similar ability of non-institutional rural lenders and can never, possibly, be acquired by other institutional agencies.