What are Co-Operative Banks?

The co-operative movement originated in the west. It has a history of almost 100 years. These banks are now an important constituent of Indian Financial System. Co-operative Banks are much more important in India than anywhere else in the world. It has gained its importance by the the role assigned to them, the expectations they are supposed to fulfill, their number, and the number of offices they operate. Their role in rural financing continues to be important even today. Due to the sharp increase in the number of Co-operative banks their business in the urban areas also has increased phenomenally in the recent years.

The Co-operative banks in the rural areas mainly finance the agricultural based activities which includes activities like farming, cattle, milk, hatchery, personal finance etc. This also includes some small scale industries and self employment driven activities. These banks mainly finance various categories of peoples for self-employment, industries, small scale units, home finance, consumer finance, and personal finance.

Some of the forward looking Co-operative banks have developed sufficient core competencies to such an extent that they are able to challenge state and private sector banks.

The exponential growth of Co-operative banks is attributed mainly to their much better contacts with the local people, personal interaction with customers, and their ability to catch the nerve of the local clientele. The total deposits and lendings of Co-operative banks according to NAFCUB are much more than the Old Private Sector Banks and the New Private Sector Banks.

The banking related activities of the Co-operative Banks are also regulated by the Reserve Bank of India, even though they are registered under the Co-operative Societies Act of the Respective States where they were formed originally. These banks are governed by the Banking Regulations Act 1949 and the Banking Laws (Co-operative Societies) Act 1965.

Co-operative Banks Types

There are two types of co-operative banks in india. The first is the short term lending oriented Co-operative Banks. In this category there are again three sub categories of banks which are the State Co-operative banks, District Co-operative banks and the Primary Agricultural Co-operative societies.

The second is the long term lending oriented Co-operative banks. In this second category there are land developments banks which are at three levels. First is the state level, the second is district level, and the third is the village level.

Again the Co-operative banking structure in India is divided into five main categories and these categories are:
1. Primary Urban Co-operative Banks.
2. Primary Agricultural Credit Societies.
3. District Central Co-operative Banks.
4. State Co-operative Banks.
5. Land Development Banks.

It is very much clear that co-operative banks have very much importance in national development. Without the help of co-operative banks, millions of people in india would be lacking the much needed financial support.