Report of Gorwala Committee and Vaidyanathan Committee- Best study notes 2022

Dr.Gorwala Committee Report 1954 and Vaidyanathan Committee Report 2005

Dr.Gorwala Committee Report 1954 and Vaidyanathan Committee Report 2005
Dr.Gorwala Committee Report 1954 and Vaidyanathan Committee Report 2005

Dr. Gorwala Committee Report 1954 Or All India Rural Credit Survey Committee


Gorwala committee also known as All India Rural Credit Inspection Commitee. In 1951, An All India Rural Credit Survey Committee was appointed under the chairmanship of Dr. A. D. Gorwala. After inspecting this situation, he submitted his report in 1954. Gorwala committee related to Cooperative Movement in India.

a) Reasons for failure of co-operative movement explained by Gorwala Committee:

1) Inadequate Diffusion :

The co-operative movement in India was not widespread. Co-operatives were not established in sufficient numbers, especially in rural areas, so the co-operative movement did not reach all sections of the society.

2) Apathy and low participation of rural people:

Even after fifty years of co-operative movement in India, there was apathy towards this movement among the people, especially the rural people, so the participation of these people in the co-operative organization was minimal. Farmers, farm labourers, women and backward class people of the society were far away from this movement.

3) Inability to provide credit:

The objective of the Indian cooperative movement was to eliminate rural indebtedness; But these organizations were not successful enough in providing loans to the common farmers and the weaker sections of the society, so the movement failed in the rural areas.

4) Group play:

The committee found that factionalism and nepotism are rampant in Indian co-operative societies. The entry of politics into the cooperative was also found to be one of the reasons behind this factionalism.

5) Inefficient workforce

The workforce of these organizations was not sufficiently educated and they were not trained in cooperation, so the efficiency of these employees was low. This was having an adverse effect on the affairs of these institutions.

6) Irregular Behavior :

The committee also found the behavior of the office bearers of the co-operative societies to be illegal. These people used the organization’s money for their activities. Also, these people were also doing business like private money lenders.

7) Improper Procedures :

The functioning of these institutions was improper. Due to strict rules for the general members and exemptions from these rules for the members of the prestigious class, common people face difficulties in getting loans due to this method.

8) Improper use of loan :

Loans from co-operative societies were used for unproductive purposes due to which the loans were not repaid by the farmers. As a result, the problem of arrears and bad loans of cooperative societies started increasing.

b) Recommendations / Measures suggested by the Gorwala Committee :

1) Involvement of Government :

Capital raising is an important factor for cooperatives to make cooperatives more powerful. The committee recommended that the government become a partner in the share capital of cooperative societies. The government should give some share in the share capital of banks like State Co-operative Bank, District Central Co-operative Bank and supply capital to the co-operative societies through it.

2) National Agricultural Supply Fund :

The Gorwala Committee recommended that medium and long-term National Agricultural Provident Funds be established through the Reserve Bank to meet the financing needs of the agricultural sector.

3) Cooperative Training :

This Gorwala committee emphasized on cooperative training. To increase the efficiency of the cooperatives, the employees of the cooperatives should be given cooperative training.

4) Reorganization and Consolidation of Co-operative Societies:

Considering the ineffectiveness of small cooperatives, this committee recommended amalgamation of small cooperatives and formation of large cooperatives. The committee was of the opinion that these large cooperatives could work more efficiently.

5) Crop Mortgage Loan Modes :

The Gorwala Committee recommended that loans to farmers should be adopted against the collateral of crops produced by these farmers. Farmers will not need to provide other collateral for loans due to crop pledge.

6) Monitoring of operations:

Creation of efficient system for monitoring and auditing the working of cooperative societies was recommended.

Vaidyanathan Committee Report 2005

A) Establishment of Vaidyanathan Committee

Government of India in 2004. A committee was appointed under the chairmanship of Vaidyanathan. It was established to revive the Co-operative Credit Institutions. The objective of this committee was to revive and re-empower the rural cooperative credit structure.

B) Purpose of establishing Vaidyanathan Committee

1) Formulate a plan for revival of rural co-operative banking institutions keeping in mind the recommendations made in this regard by various committees.
2) To suggest a suitable regulatory framework for the above reason and to suggest necessary amendments in the relevant law in that regard.
3) To determine how much, how and what should be the nature and phases of the assistance for the revival of such co-operative societies.
4) To suggest suitable measures to increase the efficiency and stability of rural cooperative credit institutions.

C) Recommendations suggested by Vaidyanathan Committee

The Vaidyanathan Committee studied the reports of the Kapur Committee of 1999, the Vyas Committee of 2001 and the Vikhe Patil Committee. It also studied the overall structure of rural cooperative credit and presented its report in 2005. In this report, the Vaidyanathan Committee made the following recommendations.

1) The Committee suggested that Co-operative credit societies and banks should be freed from the control of the State Government and that legislation should be passed in each State as in Andhra Pradesh.

2) State Government should reduce share capital participation in individual co-operative societies.

3) Taking into consideration the recommendations of the Brahma Prakash Committee and the legislation of Andhra Pradesh, the Committee suggested that the Primary Co-operative Credit Institutions should be given freedom in their credit decisions.

4) The Board of Directors of Co-operative Societies should be reconstituted and should not have members nominated by the State Government.

5) Qualified executive officers should be appointed in cooperative banks. This qualification should be determined by the Reserve Bank. Proper training should be given to the bank employees.

6) Abolition of staff cadet system at all levels.

7) Specific financial assistance should be provided to empower rural cooperative credit institutions and reduce their accumulated losses.

8) Institutional restructuring should be done to make cooperative credit institutions democratic, member-oriented, autonomous and self-sustaining.

9) Radical changes in legal regulatory framework should be made to enable Reserve Bank of India for exemplary financial management of banks.

10) The existing laws should be suitably amended so that Primary Co-operative Credit Institutions can take loans from co-operative banks outside their districts.

11) A special team should be constituted at the state level so that the credit flow of the local level institutions can be maintained smoothly.

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