What are Cooperative Banks and its different types?

Important banking qna for banking aspirants, which is helpful in banking exam.

Created On: Mar 16, 2015 15:38 IST


  • 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.


  • 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.


  • 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.


  • 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.


They are non-agricultural credit societies.

Two types:

  • 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.

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