Co-Operative Banks and Their Role in India

The co-operative banks are government backed financial institutions that work on the principle of co-operation, self-help and mutual help. The co-operative banks are mainly set up to provide access to credit in rural areas. This empowers and secures the poor and the low income groups.

Co-operative banks offer basic banking functions and services in rural, urban and semi-urban areas, where banking facilities are scarce. Unlike commercial banks whose sole purpose is profit making, co-operative banks help encourage rural business and the agricultural sector and work towards growth.

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Co-operative Banks and Their Role in India

The Objective of Co-Operative Banks:

Listed below are some of the key objectives of a co-operative bank:

• Provides credit facilities like rural financing and micro-financing.
• Co-operative banks aim to offer credit to the common man at moderate interest rates, eliminating the dominance of private money lenders.
• Providing agricultural loans to farmers at low interest rates for the growth of the agricultural sector and allied activities.
• Providing easy access to credit for rural industries.
• Providing financial services in rural areas where banking facilities are scarce.
• Helping the poor and the low-income groups, access banking facilities and get loans at low interest rates for cottage industries, agriculture, farming, small businesses and so on.

See Also: Co-operative Banks in India

Categories of Co-Operative Banks:

The co-operative banks are set up to cater to different types of customers and their credit requirements. These banks aim to solve the rural credit issues and other financial problems pertaining to the rural masses. The co-operative banks have empowered people by strengthening the rural and urban financing sector.

See Also: List of Banks in India

The most crucial contribution of co-operative banks is the role they play in offering rural financing and micro-financing services to the rural people. The co-operative banks can be categorised into two types based on their function:

• Long-term co-operative credit institutions
• short-term co-operative credit institutions

Long-term co-operative credit institutions operate on three levels. They are the state level, district level and village level.

See Also: List of Scheduled Banks in India

Short-term co-operative credit institutions can be further divided into the following types:

• State Co-operative banks
• District Co-operative banks
• Primary agricultural Co-operative banks

Considering the structure of co-operative banking in India, the co-operatives can be categorized into 5 groups:

• Primary agriculture credit society
• Primary urban co-operative banks
• District central co-operative bank
• State co-operative banks
• Land development banks

See Also: Rural Banking in India

Functions of Co-Operative Banks:

Primary Urban Co-Operative Banks (PUCBs): These banks offer services in the urban and semi-urban areas of India. The primary function of these co-operative banks is:

• Providing loans to small borrowers and small businesses.
• Extending credit facilities like term loans and working capital loans.
• Giving advances against shares and debentures.

Primary Agriculture Credit Society (PACs): These institutions mainly perform the following functions:

• Encouraging customers save money through deposits.
• Offering easy loans to customers.
• Extends services for the welfare and development of the masses.
• Supports and encourages various rural-based agricultural activities.

District Central Co-Operative Bank (DCCBs): The primary agricultural societies are affiliated to the district central co-operatives. The main functions of the DCCBs are:

• Arranging credit for the PACs and PUBCs.
• Supervising the banking business of co-operatives.
• Regulating and implementing policies.

State Co-operative Banks (SBCs): The state co-operative banks serve as the supervisory authority to the DCCBs. The SBCs are again supervised by NABARD. The SBCs serve as leaders of the co-operatives in the state.

Land Development Banks (LDBs): The land development banks are a subsidiary unit of the co-operatives, which mainly offer long-term capital to meet the requirements of the agricultural sector. The main functions of the LDBs are:

• Provide banking facilities and services to fulfil the needs for development.
• Providing secured and unsecured loans.
• To promote agriculture and increase agricultural production in India.
• Providing easy credit in rural areas.

Products and Services Offered by Co-Operative Banks:

The main services and products offered by co-operative banks are listed below:

• Deposit Facility Similar to Banks: Savings bank accounts, current accounts, recurring deposit accounts and fixed deposit accounts.
• Loan Facilities: Loans for salaried, loans for pensioners, loans to the physically challenged, housing loans, education loans, property mortgage loans, loans to entrepreneurs under various government schemes.
• Services Offered by Co-Operatives: Clearing facility, ATM facility, safe deposit locker facility, demand draft and pay order.

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