DAILY NEWS ANALYSIS

Recently, the Reserve Bank of India (RBI) released a discussion paper inviting public comments on the issuance of new licences for cooperative banks. This has revived the long-standing debate on whether cooperative banks can be effectively regulated within India’s modern, prudential banking framework. The issue is not merely about licensing but about reconciling cooperative principles with contemporary banking regulation.

About Cooperative Banks

Cooperative banks are member-owned and democratically governed institutions built on the principles of open membership, democratic control (one member, one vote), and mutuality.

Historically, they have played a crucial developmental role in rural and semi-urban India by:

• Providing affordable credit and savings facilities,

• Serving communities excluded from mainstream banking, and

• Operating on the basis of local trust and lower transaction costs.

The All-India Rural Credit Survey Committee (1954) famously observed that “if co-operatives fail, there fails the last hope of rural India.” This highlights their importance in promoting financial inclusion and grassroots development.

Current Status of Cooperative Banks

As of March 31, 2025, India had 838 cooperative banks, each with deposits below ?100 crore. No new cooperative bank licences have been issued since 2001, although the idea resurfaces periodically.

The sector remains small, fragmented, and locally concentrated, making supervision complex. Unlike large commercial banks such as State Bank of India, which can be regulated through system-based and risk-based supervision, cooperative banks require individualised oversight, thereby increasing the regulatory burden.

Structural Issues and Concerns

1. Structural Mismatch

A fundamental issue lies in the nature of cooperative capital. Share capital in cooperatives is withdrawable and linked to membership, making it behave more like a deposit than stable regulatory capital.

This structure is incompatible with the capital-centric prudential norms under the Banking Regulation Act. Hence, there is a mismatch between cooperative design and modern banking regulation.

2. Scale vs. Mutuality

True cooperatives are meant to be small, neighbourhood-based institutions. However, modern banking requires scale to provide services such as remittances, credit cards, export credit, and corporate finance.

Thus, a “cooperative bank” becomes an apparent contradiction — too small to achieve efficiency, yet too large to preserve genuine cooperative character.

3. Governance Challenges

Democratic governance allows borrower-members to sit on boards, which can weaken professional decision-making. In many large cooperative banks:

• Membership is effectively closed,

• Non-member business dominates, and

• Cooperative principles are diluted.

This raises concerns about political interference, weak management, and governance failures.

4. Regulatory Burden and Backdoor Licensing

Issuing new licences may lead to a proliferation of small, unitary institutions requiring direct supervision by the RBI.

There is also concern that cooperative licences may become a backdoor route for promoters who do not qualify for universal banking licences. The RBI thus faces a paradox: institutions that are too small to regulate efficiently, yet too large to remain genuine cooperatives.

Committee Recommendations: Divergent Approaches

Malegam Committee (2011)

The Malegam Committee supported the issuance of new licences, provided strict eligibility and prudential norms were applied. It emphasised sound governance, capital adequacy, and viability, arguing that the cooperative form alone should not disqualify institutions.

R Gandhi Committee (2015)

The R Gandhi Committee recommended resuming licences within a well-defined and differentiated regulatory framework. It proposed a four-tier structure, stricter governance norms, and encouraged consolidation and conversion of strong entities into small finance banks.

Vishwanathan Committee (2021)

The Vishwanathan Committee adopted a cautious approach, especially after failures such as Punjab and Maharashtra Cooperative Bank. It recommended focusing on strengthening existing banks, improving governance, and encouraging consolidation, rather than aggressive new licensing.

In summary, earlier committees favoured expansion with safeguards, while the latest committee prioritised stability and reform over expansion.

Reform Measures Undertaken

Amendments to the Banking Regulation Act have strengthened the RBI’s supervisory powers over cooperative banks and reduced dual regulation between the Centre and States.

Additionally, the creation of an Umbrella Organisation (UO) aims to provide shared services and lay the foundation for a federated cooperative structure.

Way Forward

1. Adopt a Federated Cooperative Model

India can move toward a federated structure, where:

• Primary cooperatives handle local customer relationships,

• National-level federations manage capital, technology, treasury, and compliance.

This would ensure stable capital at the top and inclusion at the grassroots.

2. Affiliate Rather Than Multiply

Instead of issuing numerous new licences, smaller cooperative banks can affiliate with well-capitalised federal institutions. Weak, single-branch banks may be converted into cooperative societies with cancelled banking licences.

3. Ease Regulatory Burden

Fewer but stronger institutions would allow the RBI to adopt risk-based supervision, reducing systemic risk while preserving financial inclusion.

Conclusion

Cooperatives remain vital instruments of financial inclusion in India. However, cooperative banks in their present structure face serious governance, capital, and regulatory challenges.

The Reserve Bank of India stands at a critical juncture: it can either continue with incremental licensing or undertake a structural redesign through a federated, future-ready cooperative banking model.

The central question is not whether cooperatives matter — they undoubtedly do — but whether India can reform cooperative banking to make it both inclusive and systemically sound.

The Supreme Court of India, in Dr. Jaya Thakur v. Government of India & Ors. (2026), declared Menstrual Health and Hygiene (MHH) to be a fundamental right under Articles 21 and 14 of the Constitution. The Court transformed menstrual health from a welfare policy concern into a binding constitutional entitlement enforceable across India. It also issued a continuing mandamus, meaning the matter will remain under judicial supervision to ensure proper implementation.

Constitutional Foundations of the Judgment

Article 21 – Right to Life, Dignity, and Bodily Autonomy

The Court held that the inability to access menstrual hygiene facilities exposes girls to stigma, humiliation, and social exclusion, which directly violates their right to live with dignity.

It emphasized that Article 21 protects not merely survival but a life of dignity, privacy, and bodily autonomy. Forced absenteeism or school dropouts due to menstruation were described as violations of a girl’s reproductive autonomy and constitutional rights.

The judgment clearly states that menstrual health is intrinsic to dignity and cannot be treated as a matter of charity.

Article 14 – Substantive Equality

The Court moved beyond the concept of formal equality (treating everyone the same) and adopted substantive equality, which requires the State to address structural disadvantages.

It observed that ignoring the biological needs of women creates “structural exclusion.” True equality demands that the State neutralize the disadvantages arising from menstruation so that girls can compete on equal footing with boys.

Thus, equality sometimes requires differential treatment to achieve equal outcomes.

Right to Education (RTE)

Under the Right to Education Act, 2009, the Court clarified that “free education” does not merely mean waiver of tuition fees. It includes the removal of all financial and infrastructural barriers that prevent attendance and completion of schooling.

The Court held that:

• Provision of sanitary products is essential to ensure educational access.

• Separate and functional toilets are a constitutional necessity, not just an infrastructural guideline.

• Failure to provide these facilities amounts to a “stark constitutional failure.”

This interpretation makes the RTE substantively enforceable, not merely symbolic.

Key Directions Issued by the Court

The Court issued detailed and mandatory directions applicable to both government and private schools.

Provision of Free Sanitary Products

Every school must provide free oxo-biodegradable sanitary napkins through vending machines to eliminate menstrual poverty.

Establishment of MHM Corners

Schools must create dedicated Menstrual Hygiene Management (MHM) corners stocked with spare uniforms, innerwear, and disposal materials to address emergencies.

Sanitation Infrastructure

All schools must ensure functional, gender-segregated toilets with running water and soap available at all times.

Safe Waste Disposal

Environmentally compliant disposal systems must be installed as per the Solid Waste Management Rules, 2026.

Accountability and Monitoring

District Education Officers must conduct inspections and collect anonymous student feedback to assess ground realities. Oversight is to be carried out by child rights commissions to ensure compliance.

Gender Sensitisation

The Court mandated integration of gender-responsive curriculum and teacher training. Boys must be educated about menstruation to reduce stigma and harassment.

The judgment recognises that social attitudes, not biology, are often the real barriers to equality.

Significance of the Judgment

Recognition of “Menstrual Poverty”

The Court acknowledged that lack of access to sanitary products, toilets, water, and disposal facilities constitutes menstrual poverty, which directly undermines dignity and equality.

Creation of “Biological Citizenship”

The ruling introduces the idea that if a natural biological process places women at a disadvantage, the State must intervene to neutralize that disadvantage.

This marks a shift from negative liberty (the State will not interfere) to positive liberty (the State must actively enable access and opportunity).

Transformative Constitutionalism

The judgment uses constitutional law as a tool for social transformation, aiming to dismantle stigma, gender hierarchy, and systemic exclusion.

Implementation Challenges

Despite its transformative nature, implementation may face serious obstacles:

• Infrastructure gaps, especially in rural and remote areas.

• Lack of recurring funds for maintenance and staff.

• Procurement challenges in scaling biodegradable pad supply.

• Environmental concerns regarding improper waste disposal.

• Deep-rooted social stigma affecting honest feedback mechanisms.

Without sustained funding and administrative will, constitutional promises may remain unfulfilled.

Measures to Strengthen Implementation

To ensure effective realization of this right, the following measures are essential:

• Ensuring 24/7 water supply in school toilets.

• Inclusion of trans-men and non-binary menstruators in policy design.

• Standardized procurement of quality biodegradable products.

• Privacy-focused toilet design to preserve dignity.

• Community engagement and sensitization programs.

Conclusion

The decision of the Supreme Court of India firmly establishes that menstrual health is not a matter of welfare, charity, or discretion—it is a constitutional right rooted in dignity, equality, and education.

By recognizing Menstrual Health and Hygiene as a fundamental right, the Court has affirmed a transformative principle:

Global concern over nuclear security has intensified following the expiry of the New Strategic Arms Reduction Treaty (New START) between the United States and Russia. With the lapse of the last major bilateral arms-control agreement between the world’s two largest nuclear powers, fears are rising that the international system may be entering a renewed and unconstrained nuclear arms race.

The absence of binding limits on strategic arsenals threatens global stability at a time when geopolitical rivalries are already deepening.

Rising Global Threat Perceptions

A Shifting Security Landscape

Global threat perceptions have risen sharply as great-power competition intensifies and the post–Cold War order erodes. The weakening of cooperative security frameworks has amplified mistrust and accelerated military modernisation.

Long-standing arms-control norms are deteriorating, reducing predictability and transparency in strategic affairs.

Return of Power Politics

Irredentism, neo-imperial ambitions, and assertive nationalism are reshaping global politics. Military force is increasingly used as an instrument of coercion, while diplomacy struggles to manage fast-evolving crises.

The resurgence of rivalry among major powers has increased the probability of both direct confrontations and proxy conflicts across multiple regions.

Nuclear Risks and Strategic Instability

The erosion of arms-control agreements has heightened perceptions of existential threat. Nuclear-armed states—including the United States, Russia, China, Israel, and Pakistan—are expanding or upgrading their arsenals.

With key treaties expiring and no credible replacements in sight, transparency has diminished and confidence-building measures have weakened. This raises the risk of miscalculation and unintended escalation.

Regional Insecurity Hotspots

West Asia

Shifting alliances and latent nuclear ambitions contribute to regional volatility.

Eastern Europe

Ongoing war, territorial disputes, and military escalation have heightened nuclear anxieties.

East Asia

Strategic competition, particularly involving China and the United States, is redefining deterrence dynamics and accelerating arms build-ups.

Evolution of Strategic Arms Control

START-I

The Strategic Arms Reduction Treaty (START-I) was signed in 1991 between the United States and the former USSR and came into force in 1994. It limited each side to 6,000 nuclear warheads and 1,600 delivery vehicles, but expired in 2009.

SORT (Treaty of Moscow)

The Strategic Offensive Reductions Treaty (SORT) replaced START-I, but provided less stringent verification mechanisms.

New START

The New Strategic Arms Reduction Treaty, signed in 2010 and effective from 2011, capped deployed strategic warheads at 1,550 per side, with strict limits on missiles, bombers, and launchers. It included robust verification and inspection provisions.

Its expiry removes the last remaining bilateral constraint on nearly 90% of the world’s nuclear weapons.

Impact of New START’s Expiry

The lapse of New START eliminates formal limits on US and Russian arsenals. Both countries are pursuing extensive nuclear modernisation programs, raising the possibility of rapid warhead expansion.

Without transparency mechanisms, mutual suspicion may intensify, increasing instability and reducing crisis predictability.

A Widening Nuclear Landscape

According to the Stockholm International Peace Research Institute (SIPRI), as of January 2025, nine nuclear-armed states possess approximately 12,241 warheads.

Beyond the US and Russia, the United Kingdom, France, China, India, Pakistan, North Korea, and Israel have expanded or modernised their arsenals.

China, with roughly 600 warheads, has the fastest-growing arsenal and is constructing hundreds of missile silos. India has overtaken Pakistan in estimated warhead numbers.

These trends indicate that any future arms-control framework excluding China is unlikely to be effective.

Need for a Multilateral Disarmament Mechanism

Strengthening the NPT

The Treaty on the Non-Proliferation of Nuclear Weapons (NPT) legally obliges its 191 member states to pursue nuclear disarmament. The upcoming Review Conference presents an opportunity for renewed commitments.

However, growing nuclear ambitions in multiple regions highlight the limitations of a framework that lacks universal compliance.

Role of the TPNW

The Treaty on the Prohibition of Nuclear Weapons (TPNW) comprehensively bans nuclear weapons and provides a strong moral and legal framework.

Although nearly 100 countries have signed and around 70 have ratified it, no nuclear-armed state has joined, limiting its immediate strategic impact.

The Myth of Absolute Deterrence

Possession of nuclear weapons does not eliminate conflict. Low-intensity clashes, such as those between India and Pakistan, continue despite deterrence.

Nuclear weapons introduce a constant risk of catastrophic escalation, especially under hyper-nationalistic leadership where crisis decision-making can become unpredictable.

Thus, deterrence reduces large-scale war risk but does not eliminate instability.

Suggested Measures for Global Stability

Expand Arms Control Beyond Bipolarity

Future frameworks must move beyond US–Russia centrism by formally including China and gradually integrating other nuclear-armed states. Differentiated obligations may be necessary due to asymmetric arsenals.

Adopt a Risk-Reduction First Approach

Immediate disarmament may be unrealistic. Instead, states should prioritize:

• De-alerting nuclear forces

• No-first-use commitments

• Clear nuclear doctrines

• Nuclear risk-reduction centres

Strengthen Verification Through Technology

AI-assisted monitoring, satellite imagery, and remote sensing can enhance transparency. A multilateral verification body under UN or IAEA oversight would reduce dependence on bilateral trust.

Address Emerging Technologies

Future agreements must include hypersonic weapons, cyber threats to nuclear command systems, AI-enabled platforms, and space assets. Preventing cyberattacks on nuclear command-and-control systems is particularly crucial.

Depoliticise Arms Control

Arms control should be insulated from daily geopolitical crises. Track II and Track 1.5 diplomacy involving scientists and former officials can sustain dialogue even during tensions.

Conclusion: A Critical Juncture for Global Security

The expiry of New START underscores the fragility of global nuclear restraint mechanisms. Without renewed commitment to arms control, the world risks entering a destabilising and expensive nuclear arms race.

This moment presents an opportunity for a fresh, inclusive, and multilateral approach to disarmament.

Sustained leadership by major nuclear powers, strengthened verification systems, and global diplomatic pressure are essential to ensure that nuclear weapons do not continue to dominate the future of international security.