- A co-operative bank is registered under the cooperative society’s law of the state in which it is founded.
- Serves the needs of the rural sector in general and the agricultural sector in particular.
- Provides short-term and medium-term credit to agriculture.
FEATURES OF CO-OPERATIVE BANKS
- Banking Regulation Act, 1949 is partially applicable to co-operative banks. Thus RBI has partial control on co-operative banks.
- Co-operative banks work on principles of co-operation that is the reason why co-operative banks get financial assistance from RBI on concessional rate.
- Only State Co-operative Bank can seek refinance facility from RBI.
- Co-operative banks cannot open their branches in foreign countries.
- Co-operative banks can operate its activities only within limited area.
STATE COOPERATIVE BANKS
- Organised at a state level.
- Apex of the three-tier co-operative credit structure.
- There were 28 SCBs, 14 of which were scheduled banks.
- It is only through them that the RBI provides credit to co-operatives.
- RBI generally provides loans to SCB on interest rate, one or two per cent lower than Bank Rate.
- They operate as 'balancing centres' for central cooperative banks (CCBs).
- They raise funds on their own to make them available to the CCBs and through them or directly to primary societies in such districts where CCBs are not in operation.
CENTRAL CO-OPERATIVE BANKS
- It can be divided into two parts:
- Co-operative Banking Union: Members are only Co-operative societies.
- Mixed control Co-operative Bank: Members are co-operative societies and individuals.
- These are the middle level in the three-tier structure.
- Operate at district level.
- Main function is to lend money to affiliated primary societies. The duration of loans vary from 1 year to 3 years.
- Their working capital derives from deposits, borrowings and other liabilities and owned funds.
PRIMARY CO-OPERATIVE BANKS (PCBS)
They are non-agricultural credit societies.
- urban co-operative banks
- salary earners' societies
Development of PCBs is looked after by the RBI
- Operate only in urban and semi-urban areas.
- Working capital drawn largely from public deposits and to a smaller extent from owned funds and borrowings.
- RBI and IDBI offer them concessional refinance facility on a selected basis.
- Provide housing finance and loans and advances for various other pus poses such as petty trade and industry.