DEFINITION

HISTORY

INTRODUCTION

FEATURES

FUNCTIONS

CLASSIFICATION

RECENT DEVELOPMENTS

A co-operative bank is a financial entity which belongs to its members, who are at the same time the owners and the customers of their bank. Co-operative banks are often created by persons belonging to the same local or professional community or sharing a common interest. Co-operative banks generally provide their members with a wide range of banking and financial services (loans, deposits, banking accounts…). In India co-operative banks are regulated with the RBI and governed by Banking Regulations Act 1949 and Co-operative Societies Act, 1965.

The Bank was formed in 1872 in the city Manchester in UK. The Co-operative banks in INDIA have a history of almost 100 years. The Co-operative banks are an important constituent of the Indian Financial System. Co operative Banks in India are registered under the Co-operative Societies Act. The cooperative bank is also regulated by the RBI. They are governed by the Banking Regulations Act 1949 and Banking Laws (Co-operative Societies) Act, 1965. These banks were conceived as substitutes for money lenders.

Co-operative bank performs all the main banking functions of deposit mobilisation, supply of credit and provision of remittance facilities.

Co-operative Banks belong to the money market as well as to the capital market.

Co-operative Banks provide limited banking products and are functionally specialists in agriculture related products. However, co-operative banks now provide housing loans also.

UCBs provide working capital loans and term loan as well.

• Customer-owned entities: In a co-operative bank, the needs of the customers meet the needs of the owners, as co-operative bank members are both.

• Democratic member control: Co-operative banks follow the principle of “one person, one vote”.

• Profit allocation: Profit is usually allocated to members which is related to the number of shares subscribed by each member.

Co-operative Banks are organised and managed on the principal of co-operation, self-help, and mutual help. They work on the basis of “no profit no loss”. Profit maximization is not their goal

Co-operative bank do banking business mainly in the agriculture and rural sector. However, UCBs, SCBs, and CCBs operate in semi urban, urban, and metropolitan areas also.

The State Co-operative Banks (SCBs), Central Co-operative Banks (CCBs) and Urban Co-operative Banks (UCBs) can normally extend housing loans upto Rs 1 lakh to an individual. The scheduled UCBs, however, can lend upto Rs 3 lakh for housing purposes. The UCBs can provide advances against shares and debentures also.

Finance Function:

1. Cooperative banks in India finance rural areas under: FarmingCattleMilkPersonal finance

2. Cooperative banks in India finance urban areas under: Self-employment IndustriesSmall scale unitsHome financeConsumer financePersonal finance

Some co-operative bank are scheduled banks, while others are non-scheduled banks. For instance, SCBs and some UCBs are scheduled banks but other co-operative bank are non-scheduled banks. At present, 28 SCBs and 11 UCBs with Demand and Time Liabilities over Rs 50 crore. Co-operative Banks are subject to CRR and liquidity requirements. However, their requirements are less than commercial banks.

Sr.No. Category of bank

Minimum SLR holding in Government and other approved securities as percentage of Net Demand and Time Liabilities (NDTL)

1. Scheduled banks

25%

2. Non-Scheduled banksa) with NDTL of Rs.25 crore & above b) with NDTL of less than Rs.25 crore

15%

10%

Over the years, primary (urban) cooperative banks have registered a significant growth in number, size and volume of business handled. As on 31st March, 2003 there were 2,104 UCBs of which 56 were scheduled banks. About 79 percent of these are located in five states, - Andhra Pradesh, Gujarat, Karnataka, Maharashtra and Tamil Nadu. According to sources the total deposits & lendings of Cooperative Banks in India are much more than Old Private Sector Banks & also the New Private Sector Banks.