What Led To The Collapse?

Cooperative banking in India, which emerged as an alternative to the exploitative money lenders, is more than two centuries old. These banks played a crucial role in extending rural credit, thereby strengthening the rural economy. The impressive growth of cooperative banking - accounting for eight per cent of deposits and nine per cent of loans of India’s banking system - played an important role in financial inclusion too. Cooperative banking has had its share of crisis. The collapse of the Madhavpura Cooperative Bank in 2001, caught in the Ketan Parekh engineered stock market scam, was a major set back. The recent scam in the Punjab Maharashtra Co-operative (PMC) Bank came as a rude shock to the depositors and the co-operative banking system itself. The RBI-imposed cap on withdrawals impacted 16 lakh depositors, 60 per  cent of whom are small depositors with deposits...