Slamming the working style of cooperative banks, Reserve Bank governor D Subbarao said that there was urgent need to overhaul the functioning of these banks that would help country achieving financial inclusion agenda. "Governance in cooperative banks lacks professionalism. There is need to professionalise both their governance structure and their functioning," Subbarao told an international seminar on cooperatives in Pune on Friday.

The RBI governor said that the cooperatives are basically ‘leader centric’. “These banks crumble once a particular leader leaves and it should institutionalise leadership at grass-roots level,” he added.

He also said that credibility of the cooperative banks has ‘eroded’ in the last few years while it could have played greater role. “The share of rural cooperatives has decreased to 3.7 percent in 2010 from the 7.2 percent in 2001,” he pointed out.   

Subbarao said the boards of the cooperative banks need to restrict their role to governance and let the senior management led by a chief executive manage the day-to-day operations. "Governance has to be segregated from management," he said, adding the board should exercise oversight only through established channels like reviews and progress reports.

"For a variety of reasons, both financial and governance related, the credibility of cooperatives has got eroded, especially since cooperatives have come under the spell of several infirmities, some of them chronic," he said. He also said they should adopt the latest technologies in order to be at par with commercial banks. Coming down on cooperatives for being "leader centric", Subbarao said they crumble once a particular leader leaves and asked for institutionalising of leadership at grass-root level.

He also said they should adopt the latest technologies in order to be on a par with commercial banks.