Cooperative banks in India are regulated by the Reserve Bank of India through Banking regulation act 1949 and Banking laws (cooperative society) act 1955 and are registered under the States Cooperative Societies Act.
Cooperative banks were initially established to provide credit to members and liberate the underprivileged from the clutches of unscrupulous moneylenders who demanded exorbitant interest rates.
Cooperative banks in India play a crucial role in the country's financial system by promoting financial inclusion and catering to the credit needs of various sectors, especially in rural and semi-urban areas. These banks operate on the cooperative principles of self-help and mutual assistance.
The structure of a cooperative bank in India is organized in a hierarchical manner, with different levels serving specific functions. Here is a breakdown of the typical structure of a cooperative bank in India
Central Cooperative Banks (CCBs): CCBs operate at the district level and act as intermediaries between PACS and higher-level institutions. They provide financial assistance to PACS and coordinate their activities. CCBs function as the apex cooperative banks for PACS within a district.
State Cooperative Banks (SCBs): SCBs operate at the state level and serve as apex institutions for CCBs. They provide financial assistance and guidance to CCBs. SCBs are responsible for coordinating and overseeing the functioning of cooperative banks within the state.
National Bank for Agriculture and Rural Development (NABARD): While not a cooperative bank itself, NABARD plays a crucial role in supporting and regulating cooperative banks in India. NABARD acts as the apex institution at the national level for coordinating the activities of various institutions involved in rural development, including cooperative banks.
Regulatory Authorities: The Reserve Bank of India (RBI) is the primary regulatory authority overseeing the functioning of cooperative banks. NABARD also plays a regulatory role, particularly in matters related to agricultural and rural development
Cooperative banks in India perform a variety of functions aimed at promoting financial inclusion, supporting rural and agricultural development, and serving the financial needs of their members. Here are the key functions of cooperative banks in India:
Credit Functions: Cooperative banks provide credit facilities to farmers, agricultural workers, and rural entrepreneurs. They offer various types of loans, including crop loans, term loans, and working capital loans, to meet the diverse needs of the agricultural sector.
Deposit Functions: Cooperative banks accept deposits from their members and the public. They offer savings accounts, fixed deposits, and recurring deposit schemes to encourage savings.
Marketing and Processing Functions: Some cooperative banks engage in marketing and processing activities to help farmers sell their agricultural produce at fair prices. They may also provide processing facilities for certain agricultural products.
Supply of Agricultural Inputs: Cooperative banks often supply agricultural inputs such as seeds, fertilizers, and pesticides to their members at reasonable rates, contributing to the overall development of the agricultural sector.
Financial Inclusion: Cooperative banks play a crucial role in promoting financial inclusion by reaching out to rural and underserved areas. They provide banking services to people who may not have access to traditional banking institutions.
Developmental Functions: Cooperative banks participate in various developmental programs initiated by the government and NABARD. These programs aim to uplift the rural economy through infrastructure development, capacity building, and skill enhancement.
Community Development: Cooperative banks often engage in community development activities, including education, healthcare, and other social welfare initiatives, contributing to the overall well-being of their members and the community.
Cooperative banks are often regulated under both banking and cooperative legislation. They play a significant role in the Indian economy, particularly in rural areas, and serve a diverse range of customers, including farmers, small businesses, and self-employed individuals.
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