TOPIC: COOPERATIVE BANKS

INTRODUCTION OF COOPERATIVE BANK

WHAT IS COOPERATIVE BANK
DEFINATION OF COOPERATIVE BANK
FEATURES OF COOPRAIVE BANK
TYPES OF COOPERATIVE BANK
FACT OF COOPERATIVE BANK
CURRENT SCENARIO
INTRODUCTION: COOPERATIVE
BANKS

Cooperative banks started in INDIA in1904.

The first urban cooperative credit society was registered in
CANJEEVARAM (KANJIVARAM) in the erstwhile Madras
province in October, 1904.
 They are the primary financiers of agricultural activities, some
small-scale industries and self-employed workers.
 The ANYONYA CO-OPERATIVE BANK in India is
considered to have been the first cooperative bank in ASIA.
 They perform all the activities as all banks perform.
WHAT IS COOPERATIVE BANK
COOPERATIVE BANK: Co-operative banks are
small-sized units organized in the co-operative sector
which operate both in urban and non-urban centers

In India, co-operative banks finance small borrowers in

industrial and trade sectors, besides professional and salary
classes.
DEFINATION OF COOPERATIVE
BANK

DEFINATION : It is a business
organization owned and managed by a
group of individual for their mutual benefit
TYPES OF COOPERATIVE BANKS
Function of cooperative bank
 Duality control: cooperative banks were control by both
the regulatory RBI as well as GOVERNMENT.
 FUNCTION CONTROLLED BY RBI: Banking related
functions (viz. licensing, area of operations, interest rates
etc.) were to be governed by RBI.
 FUNCTION CONTROLLED BY GOVERNMENT:
registration, management, audit and liquidation, etc.
governed by State Governments.
 PROMOTE BACKWARD AREA: the main function of
cooperative banks is to open the branches in backward area
support from RBI and Government.
 Financing rural sector : Farming Cattle Milk
Personal finance
 Financing rural sector : Self-employment ,Small scale units
Home finance, Consumer finance etc
Features of cooperative banks

PURPOSE: First important feature of cooperative banks is not
maximize profit but to provide the best product and services to its
member

VOTING RIGHTS: Members of cooperative banks democratically
elect board of directors. Members usually have equal voting rights
according to the co-operative principle of “one person, one vote

PROFIT SHARING: cooperative banks divided their profit either
through dividend or through an interest which is related to number
of shares held by the members
AREA OF OPERATION: as there is limited capital the cooperative
banks operates under local areas
REGISTRATION : It is registered under the cooperative societies
act 1965
 SOURCES OF FUND :Their main sources of fund are(a)
central and state government,(b) the Reserve Bank of India
and NABARD, (c) other co-operative institutions, (d)
ownership funds and, (e) deposits or debenture issues

 CONTINUOUS EXISTENCE: cooperative society can enjoy

long life even if death of member or retire of member.
 Type of cooperative banks
URBAN COOPERATIVE BANKS

STATE STATE LAND

COOPERATIVE DEVELOPMEN
BANK T

CENTRAL CENTRAL
COOPERAIVE
URBAN COOPERATIVE BANKS LAND
DEVELOPMEN
BANK STATE LAND DEVELOPMENT
T
STATE COOPERATIVE
BANK

PRIMARY AGRI NABARD PRIMARY

CREDIT LAND
SOCIETY DEVELOPMEN
T
RBI
STATE COOPERATIVE BANKS
 TIER : state cooperative banks is the first tier of
cooperation credit structure
 BRANCHES : there are 28 state cooperative banks with
branches in the country .they are the apex banks in
cooperation credit structure .
 AIM: these state cooperative bank are advance loan to
central cooperative banks
 REGULATION: they also coordinate & regulate the
working of CCB’s
 LINK: they form a link between RBI, NABARD, OTHER
LOWER LEVEL COOPERATIVE BANKS.
 SOURCE OF FUND: They get 50-90% of advances from
NABARD, DEPOSIT FROM PUBLIC, GENERAL
RESERVES
 LENDING AMOUNT: SCB’s annually lends Rs7700 to
CCB’s & PACS
Central cooperative banks
 TIER : district central cooperative banks is the second tier
of cooperation credit structure
 AIM: district central cooperative bank are advance loan to
primary agriculture credit society (PACS) cooperative banks
so they can fulfilled need or requirement of farmer
 BRANCHES : there are 364 district central cooperative
banks with branches in the country .
 MANAGE BY: district central cooperative banks by some
private individual as shareholder as well as management.
Most of these banks are under controlled by political leaders
 LINK: they form a link between state cooperative banks &
primary agriculture credit society
 SOURCE OF FUND: They get advances from state
government , NABARD, RBI.
PRIMARY AGRICULTURE CREDIT SOCIETY (PACS)

 TIER : primary agriculture credit society is the third tier of

cooperation credit structure.
 COMMENCE: primary agriculture credit society started by
ten or more member in village.
 MANAGEMENT : the management was under elected body
of a PRESIDENT, TREASURER & SECRETARY.
 PERIOD OF LOAN: primary agriculture credit society
provide short term loan to farmer for 1year for Agriculture
purpose
 RATE OF INTEREST: primary agriculture credit society
provide on 10 to 12per annum of rate of interest.
 LENDING AMOUNT: in 1950-51 they advance loans worth
Rs 23 crore which rose to 200 crore in 1960-61 and 14000
crore in 1997-98 & entered into weaker section of credit
society
Shortcomings of Dual Control
Contd…..
Banking related functions (viz. licensing,
area of operations, interest rates etc.) were
to be governed by RBI under Banking Act.

Registration, management, audit and

liquidation, etc. governed by State
Governments as per the provisions of
respective State Acts, in 1968.
Contd…
Y V Reddy (Reserve Bank Governor)
• "It has been difficult to ensure effective
coordination owing to the problems of dual
control (over UCBs) in the matters of
governance, which have a bearing on
prudential regulation,"
 Problems:
• Misutilisation of resources by the management:
 The problem the regulator faces in monitoring these banks
arises due to the sheer number of banks. This makes it
extremely difficult if not impossible for the regulator to gather
data to detect and suggest prompt corrective measures.

• Prompt regulatory action:

 There are several areas where the jurisdictions of RBI and state
governments overlap. This leads to delays in implementation
of corrective policies in banks that are suspected to engage in
mismanagement.
Contd…
• Political interference
 The involvement of politicians in their functioning. It is
commonly argued that politicians use cooperative banks to
allocate favours to extract political rents. This makes banks
weak as they are used to allocate loans in exchange for
political favours. The interference of politicians also creates
hurdles for regulators in implementing corrective measures in
mismanaged banks.

• Lack of professional management

 As the Banks have dual control lot of their time, resources,
funds, and man power is utilized in managing these two
regulators. So a professional approched is lacking
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