Relationship with the RBI, NABARD and the District Central Co-operative Banks

The whole importance of the Maharashtra State Co-operative Bank lies in the two sets of relationships it holds at the same time: upward, with the Reserve Bank of India and NABARD; and downward, with the district central co-operative banks. It is the hinge that joins the national credit system to the village society.

A. Relationship with the Reserve Bank of India (RBI).

• As a regulator. Because the MSC Bank does banking, it is licensed and supervised by the RBI under the Banking Regulation Act, 1949 (as applicable to co-operative societies). It must keep the prescribed Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR), obey the RBI's directions on lending and interest, and submit to its inspection. (At the same time, as a co-operative, its registration, bye-laws, elections and audit are controlled by the Registrar of Co-operative Societies — this is the same dual regulation studied for the urban co-operative bank.)
• As a source of finance. Historically the RBI provided refinance to the co-operative structure through the apex banks; much of this refinancing role for agriculture now runs through NABARD, but the RBI remains the ultimate banking authority and the source of the reserve requirements that keep the bank safe.

B. Relationship with NABARD.

• NABARD (National Bank for Agriculture and Rural Development) is the country's apex institution for rural and agricultural credit. The MSC Bank is the main channel through which NABARD's refinance reaches the co-operative structure of Maharashtra.
• NABARD provides short-term, medium-term and long-term refinance to the apex bank, which passes it down to the district central banks and thence to the village societies and farmers. NABARD also inspects and guides the co-operative banks, so it is both a financier and a supervisor of the structure.

C. Relationship with the District Central Co-operative Banks (DCCBs).

• The DCCBs are the members of the apex bank, and the apex bank is their bank. It finances them, keeps their surplus deposits, and lends to those that are short.
• It acts as a balancing centre among the districts, shifting funds from surplus districts to deficit ones.
• It guides, inspects, advises and trains the DCCBs, and represents them before the RBI, NABARD and the government — earning its description as their 'friend, philosopher and guide'.