Banking Awareness forms an important part of Bank exams. Study our Banking Awareness topics to excel in Bank exams. Cooperative Banks in India

Definition (1): A cooperative bank is a financial entity that belongs to its members, who are both owners and customers of their bank. The co-operative Bank involves an autonomous association of persons united voluntarily to meet their common economic, social and cultural needs through a jointly owned and democratically-controlled enterprise.

Structure of Cooperative Banks in India 

The numbers (1-12) used in the image are used in further discussion for easy identification of the types of the bank. Cooperative Banks can be further subdivided into mainly two types: one is Urban Cooperative Banks also known as Primary Cooperative Banks and the other is Rural Cooperative Banks

Primary Cooperative Banks (PCBs)– (2), also referred to as Urban Cooperative Banks (UCBs), cater to the financial needs of customers in urban and semi-urban areas. They cater to the needs of the non-agricultural sector, particularly small borrowers.

PCBs can be either Single State (3)(When operational only in one state) or Multistate (4) (When operational in more than one state).

PCBs are primarily registered as cooperative societies under the provisions of either the State Cooperative Societies Act of the State concerned or the Multi-State Cooperative Societies Act, 2002

Registration and Management activities are managed by the Registrar of Cooperative Societies (RCS). These RCS operate in single-state and Central RCS (CRCS) operate in multiple states.

Rural Cooperative Banks (5) – The rural co-operative credit system in India is primarily mandated to ensure the flow of credit to the agriculture sector. It comprises short-term (6) and long-term co-operative credit structures (10).

• Short-term co-operatives primarily provide short-term crop loans and working capital loans to farmers and rural artisans.
• Long-term co-operatives typically provide medium to long-term loans for making investments in agriculture, including land development, farm mechanization and minor irrigations; rural industries; and lately, housing.

The short-term co-operative credit structure operates with a three-tier system –

• Primary Agricultural Credit Societies (PACS) (7) at the village level,
• Central Cooperative Banks (CCBs) (8) at the district level and
• State Cooperative Banks (StCBs) (9) at the State level.

• Primary Agricultural Credit Societies (PACSs) are not banks but only societies. PACS are outside the purview of the Banking Regulation Act, 1949 and hence not regulated by the Reserve Bank of India.
• StCBs/DCCBs are registered under the provisions of State Cooperative Societies Act of the State concerned. DCCSs and StCBs are regulated by RBI and Supervised by NABARD under Sec 35 A of the Banking Regulation Act.

The long-term co-operative credit institutions (10)have generally a two-tier structure comprising the State Co-operative Agriculture and Rural Development Banks (SCARDBs)(11) and the Primary Co-operative Agriculture and Rural Development Banks (PCARDBs)(12). The States not having long-term co-operative credit entities are served by the State Co-operative Banks apart from being serviced by the branches of Regional Rural Banks (RRBs) and the rural/semi-urban branches of commercial banks.

SCARDBs operate at the state-level and PCARDBs operate at the district/block level.

One Liners Based on Co-operative Banks

1. Under the Banking Regulation Act, 1949 only Urban Co-operative Banks (UCBs), State Co-operative Banks (StCBs) and Central Co-operative Banks (CCBs) are qualified to be called as banks in the co-operative sector.
2. UCBs are supposed to maintain CRR and SLR. 
3. PACS form the grass-root level tier of the short-term co-operative credit structure.
4. Under the provisions of Section 11 of the Banking Regulation Act, 1949, no primary (urban) cooperative bank can commence or carry on banking business if the real or exchangeable value of its paid-up capital and reserves is less than Rs.one lakh.
5. Y.H Malegam Committee recommended a BoM (board of management) in every UCB 
6. The short-term co-operative credit structure operates with a three-tier system.
7.  PACS are outside the purview of the Banking Regulation Act, 1949 and hence not regulated by the Reserve Bank of India.
8. Regulators and Supervisors of various CBs
9. PCBs can be either Single State (3) or Multistate. PCBs are primarily registered as cooperative societies under the provisions of either the State Cooperative Societies Act of the State concerned or the Multi-State Cooperative Societies Act, 2002
10. SCARDB and PCARDB Full Form

 

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