PROVISION 01' BORROWING FACILITIES. 259 



may be caused to the society, by the failure of a borrower and his 

 sureties to fulfil their obligations, will ultimately fall on the whole 

 body of members. 



299. Gratuitous services in connection with the bank's business 

 are desirable, because, as the bank works only for the benefit of its 

 own members, and the primary object of the society is to facilitate the 

 obtaining of loans at reasonable interest, any expense would have 

 to be borne by the society and would tend to nullify the object in 

 view. Moreover, such gratuitous service directly tends to foster a 

 sense of public duty and the acquirement of business habits. As a 

 village bank does not meet usually more than twice a month and the 

 proceedings do not occupy more than an hour or so, the amount of 

 labour devolving on the office-bearers is trifling. 



300. The formation and indivisibility of the reserve is one of the 

 great sources of strength to a village bank. As the association starts 

 without any subscribed capital, the formation of a continually 

 growing reserve to supplement the guarantee of the associated 

 members is necessary both to enable the members to obtain better 

 terms when borrowing and to safe-guard them from the loss which 

 default on the part of any members might bring upon them. 

 As the members do not associate for the purpose of profit on 

 invested capital, but for the purpose of furthering their 

 common interest, all profits obtained from the bank's operations are 

 carried to a common fund, the joint property of all the members. 

 The division of this fund is forbidden in order to prevent its growth 

 arousing the cupidity of the members, and tempting them to break up 

 their society for the sake of small temporary prolit. 



301. The village bank organised on the preceding principles must 

 obtain at the outset from, some source outside itself the capital with 

 which it has to work. In those European countries where the system 

 of agricultural banking has taken root, village banks are largely 

 financed byl Central Banks operating on a large scale ; but in India 

 there is no hope, in the beginning, at all events, that these Central 

 Banks or Joint Stock Companies will come into existence. Efforts must 

 therefore be made to create local agencies. It may be that at first 

 such efforts may not be successful, and in this case there would be, we 

 think, no objection to employing State aid to finance experimental 

 village banks. But the object should be to avoid the intervention of 

 the State, except in the matter of audit and supervision. 



