Sources of Funds of the Maharashtra State Co-operative Bank

A bank can lend only what it can raise. The funds of the Maharashtra State Co-operative Bank, like those of any co-operative bank, come from two broad sources — its owned (internal) funds and its borrowed (external) funds — but because it is the apex bank, its borrowed funds include a special source: refinance from the RBI and NABARD. It is useful to see the two classes side by side before studying each.

A. Owned funds.

• Share capital — The apex bank's share capital is subscribed chiefly by its member district central co-operative banks and by the State Government, which often contributes to the share capital of the apex bank to strengthen the movement. This forms the foundation capital.
• Entrance fees — A small, non-refundable fee paid once by every member institution on admission.
• Reserve fund and other reserves — A part of every year's profit is set aside, by law and by prudence, as a reserve fund to strengthen the bank and meet future losses; other reserves are built up in the same way.
• Undistributed profit — Profit not paid out as dividend but ploughed back into the business adds to owned funds.

B. Borrowed funds.

• Deposits — A large source. The apex bank receives deposits from its member district banks and other co-operative institutions, from the government, and from the public, in current, savings and fixed forms.
• Borrowings and refinance from the RBI and NABARD — The special source of the apex bank. It borrows short-term and medium-term funds (refinance) from the Reserve Bank of India and, especially, from NABARD, which it then passes down to the district central banks. This national credit is what allows the co-operative structure to lend far more than its own savings would permit. …