Sources of Funds of a District Central Co-operative Bank

A bank can lend only what it can raise, and the DCCB — which has to finance a whole district of societies — must raise its funds from several sources. As with any co-operative bank, its funds fall into owned (internal) funds and borrowed (external) funds; but because of its middle position, the DCCB has one special source that an ordinary bank does not: the surplus of its own member societies and refinance from the tier above.

A. Owned funds.

• Share capital — The largest part of the DCCB's share capital comes from its member societies, each of which subscribes to shares; a society that borrows is usually required to hold shares in proportion to the loans it takes. Individual members and, in some cases, the State Government (by contributing to share capital to strengthen the bank) may also hold shares. Share capital gives the bank its foundation capital.
• Entrance fees — A small, non-refundable fee paid once by every new member on admission, added to the bank's funds.
• Reserve fund and other reserves — A part of every year's profit is, by law and by prudence, carried to a reserve fund to strengthen the bank and meet future losses; other reserves (for building, bad debts, dividend equalisation, etc.) are built up similarly.
• Undistributed profit — Profit not paid out as dividend but ploughed back also swells the owned funds.

B. Borrowed funds.

• Deposits — A major source. These come from the member societies (which deposit their surplus funds with the DCCB, and are often required to keep a part of their funds there), and also from individuals and the general public in the form of current, savings, fixed and recurring deposits.
• Borrowings from higher institutions — When its own resources fall short, the DCCB borrows from the State Co-operative Bank above it, and draws refinance from NABARD (for agricultural and rural credit) and, where eligible, from the Reserve Bank of India. …