424 PROVISION OF BORROWING FACILITIES. 



of opinion that one of these safeguards should be the limiting of the 

 dividends to 10 or 12 per cent. 



The Sub-Committee note that the Central Banks at present in 

 existence check the security of the societies to which they lend by 

 one of three methods (1) by a special staff appointed and paid for 

 by the Directors of the Central Bank, (fc) by accepting the inspection 

 and report of a Union (or where the Union is amalgamated with a 

 Central Bank, the Central Banking Union) of societies, who them- 

 selves pay and employ a staff for inspection, and (3) by relying on 

 the inspections and reports of the Registrar and his staff. While 

 recognising that the third method may be necessary in the beginning, 

 the Sub-Committee are strongly of opinion that it should be done 

 away with as soon as possible. Of the other two methods where, as 

 is recommended, the whole or the great majority of shareholders in 

 the Central Bank are societies and the bank deals only with societies, 

 the second, mz., the reliance on the reports of the Unions is 

 preferable. It is better that the inspecting staff should be paid 

 and employed by the Union or Central Banking Union which would 

 collect the cost rateably from the societies than that it should be 

 employed and paid out of the profits of the Central Bank. Where 

 however Unions do not exist, the special staff must be paid by the 

 Central Bank. 



As has been said above the Sub-Committee see no objection to 

 combining a co-operative Central Bank with a Union, and such 

 combinations should be known as Central Banking Union. 



The Sub-Committee desire to re-affirm the finding of the third 



c!5 



Conference of Registrars that the great aim of all Central Banks 

 should be to accumulate local capital, and only in the event of such 

 capital not being forthcoming in sufficient quantity, should money 

 be borrowed from outside. At the same time they recognise the 

 desirability in all cases of a Central Bank having a cash credit 

 account with a Joint Stock Company such as the Bank of 

 Bengal, Allahabad Bank, Alliance Bank of Simla or the Benares 



O ' 



Bank. 



With regard to rates of interest on loans to societies the Sub- 

 Committee are of opinion that the Central Bank should not reduce 

 these below 9 to 12 per cent, in the first instance, even when it is able 

 to borrow money at 6 per cent, to 7 per cent. The societies as a 

 rule will take money willingly at these rates and it is desirable that 



