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Cooperative Banks in India

Cooperative banks are financial institutions in India that function on a cooperative basis, primarily offering financial services to their members. These banks differ from commercial banks in that their members, who are often individuals or small enterprises, own and operate them. Cooperative banks play an important role in fostering financial inclusion and serving the agricultural and rural sectors’ requirements. Cooperative banks are important financial institutions catering to the needs of members in small towns and villages. Cooperative banks in India are established under the provisions of the Cooperative Societies Act of 1912. Their operations are overseen and governed by the Reserve Bank of India (RBI) through the framework of the Banking Regulation Act of 1949 and the Banking Laws (Application to Cooperative Societies) Act of 1965. Here in this article, candidates can get all the details on Cooperative Banks in India.

Why Cooperative Banks in India Are In News

In the recent past, a number of financial irregularities have surfaced in Cooperative Banks in India. Almost all major regions of India have witnessed financial wrongs and scant regard for financial prudence in the operation of Cooperative Banks. In July 2023 Punjab and Maharashtra cooperative banks have been under scanners by RBI for ill practices. In more contemporary times the working of Cooperative Bank In Kerala had caused much flutter in the banking industry. With RBI and Government tightening their grip over functioning and regulatory practices, it is pertinent that Cooperative Banks have become a hot topic for candidates preparing for various examinations.

Cooperative Banks In Indin 2023

The candidates must have some idea about the breadth and length of cooperative banks in India. Cooperative banks are important tools for financial inclusion and last-mile delivery of credit and banking services. The cooperative banks be visualized as people-run and people-run banks. These banks were founded with the guiding principle of “no profit, no loss,” therefore they don’t merely look for lucrative business opportunities and clients. As per the 2011 census around 70% of the Indian population is rural or semi-urban, which further enhances the value of cooperative banks as visualized in the classical hub and spook model. Here is some data related to cooperative banks in India.

Cooperative banking encompasses both retail and business banking, is organized on a cooperative foundation, and operates globally by accepting deposits and providing credit.
It involves retail banking activities executed by entities like credit unions, mutual savings banks, building societies, and cooperatives, along with commercial banking services for cooperative businesses offered by mutual organizations such as cooperative federations.
During the 2007-2008 financial crisis, cooperative banks demonstrated better performance compared to their competitors, as indicated by a 2013 ILO assessment.
Despite holding a 20% share of the European banking market, only 7% of losses and write-downs in the period from the third quarter of 2007 to the first quarter of 2011 were attributed to the cooperative banking sector.
In a survey spanning 10 nations, cooperative banks were notably prominent in lending to small and medium-sized enterprises, reinforcing their role in supporting such businesses.

Types Of Cooperative Banks In India

There are different types of cooperative banks in India. They work at different levels and as per a fixed hierarchy. There are two main categories of cooperative banks in India and other categories The Co-operative banks are governed by the,

- Banking Regulations Act, 1949.
- Banking Laws (Co-operative Societies) Act, 1955.

Here are the types of Cooperative Banks In India:

Urban Co-operative Banks

Non-Scheduled UCBs
Scheduled UCBs

Rural Co-operative Banks

State Cooperative Banks
District Central Cooperative Banks
Primary Agricultural Credit Societies

Co-operative Banks in India: Timeline

Here is a brief history of the development of Cooperative Banking in India. Though the fundamental structure of India in the past points towards persistent cooperation and coordination. Here is a brief timeline for the growth of Co-operative Banks in India.

Cooperative Credit Societies Act, 1904: This act marked the initial step towards the establishment of cooperative societies, particularly in the area of credit. It laid the foundation for the cooperative movement in India.
Cooperative Societies Act, 1912: Building upon the earlier act, the Cooperative Societies Act of 1912 further advanced the cooperative movement. It provided a legal framework for the formation and functioning of cooperative societies in various sectors.
Central Committee for Cooperative Training: In the post-independence era, the Reserve Bank of India (RBI) took proactive steps to enhance cooperative training. In 1953, the Central Committee for Cooperative Training was established by the RBI. Its purpose was to establish cooperative training centers, ensuring the development of skilled personnel in the cooperative sector.
Rural Credit Survey Committee, 1954: Recognizing the financial challenges faced by rural areas, the Rural Credit Survey Committee was established in 1954. This committee aimed to address the issues related to rural credit and financial crisis, promoting the growth of cooperatives in rural regions.
Expansion of Cooperative Banks: By the 1950s, cooperative banks had started reaching out to a broader population, both in rural and urban areas. The cooperative banking sector began to play a significant role in providing accessible financial services and credit facilities to various segments of society.

Co-operative Banks in India and Their Role

Cooperative banks contribute to the socio-economic development of their communities while fostering a sense of ownership and participation among their members. Here is the role of cooperative banks in India.

Financial Inclusion: Cooperative banks extend banking services to rural and economically weaker sections of society, promoting financial inclusion and ensuring that a broader population has access to essential financial services.
Credit for Agriculture and Small Businesses: These banks provide credit facilities to small and marginal farmers, agricultural workers, and micro and small enterprises. They play a vital role in supporting rural livelihoods and fostering rural economic development.
Savings Mobilization: Cooperative banks encourage savings habits among members, helping them accumulate funds for future needs. This, in turn, contributes to capital formation and investment in local economies.
Community Development: Cooperative banks often participate in community development initiatives. They support local projects, infrastructure development, and other community-oriented endeavors that contribute to the well-being of their members and the broader community.
Local Focus: Being community-based institutions, cooperative banks have a deep understanding of local needs and challenges. This enables them to design tailor-made financial products and services that cater to the specific requirements of their members.
Member Empowerment: Cooperative banks empower their members by involving them in decision-making processes. Members have a say in the bank’s policies, management, and allocation of surplus funds.
Support for Weaker Sections: Cooperative banks are committed to serving weaker sections of society, including women, marginalized groups, and low-income individuals, by providing them with financial assistance and services.

Advantages of Cooperative Banks In India

Here are a few advantages of Cooperative Banks In India.

Rural Assistance: Co-operative banks extend loans and credits to rural communities at lower interest rates compared to local money lenders.
Extensive Reach: With branches across the nation, they maintain personalized relationships with customers.
Member Ownership: Being owned and governed by members, these banks prioritize mutual aid over excessive profits.
Interest Rates: Co-operative banks offer high deposit interest rates and lower lending rates.
Productive Borrowing: They promote responsible borrowing to reduce the risk of financial losses.
Agricultural Support: Farmers benefit from agricultural credits for essential supplies like fertilizers and seeds.

Disadvantages of Co-operative Banks

Here are a few disadvantages of Co-operative Banks in India:

Dependence on Investors: Co-operative banks require investors for lending, which can be challenging to find.
Increasing NPAs: The number of non-performing assets (NPAs) and overdues has been on the rise.
Limited Credits: Some banks struggle to provide credits to rural areas due to lack of funds.
Inequitable Benefits: Wealthy landowners often benefit more than small industrialists.
Uneven Development: Co-operative banks’ progress varies across states, with some facing losses.
Political Interference: Instances of political interference have been observed in these banks.
Competition from New Banks: Emerging banks pose a risk of customer loss for cooperative banks.

List of Cooperative Banks In India

Here is a list of a few Cooperative Banks In India. We have also given essential details related to these banks.

Sl. No.	Cooperative Bank	Year Founded	Headquarters	Notable Achievements
1	Saraswat Co-operative Bank	1918	Mumbai	Best technological bank of the year (2019)
2	Cosmos Co-operative Bank	Not Specified	Not Specified	First bank to open a currency chest
3	Shamrao Vithal Co-operative Bank	1906	Mumbai	Best Urban Co-operative Bank award (2018)
4	Abhyudaya Co-operative Bank Ltd	1964	Mumbai	Best IT Enabled Co-operative Bank award (2014-15)
5	Bharat Co-operative Bank	1978	Mumbai	Best Information Technology & Urban Co-operative Bank award (2016)
6	TJSB Co-operative Bank	1972	Not Specified	Pioneering UPI launch & Mobile App solutions
7	Janata Co-operative Bank	Not Specified	Bengaluru	Consistent 18% dividend payments to shareholders
8	Kalupur Commercial Co-operative Bank	1970	Gujarat	Use of RTGS & state’s first dealership approval
9	NKGSB Co-operative Bank	1917	Not Specified	Reputable institution with a clear set of principles
10	Ahmedabad Mercantile Co-operative Bank	1966	Ahmedabad	Focus on quick & precise service, 34 branches