INDEX

1.DEFINITION

2.FEATURES

3.HISTORY

4.ESTABLISHMENT

5.FUNCTIONS

6.TYPES

7.CLASSIFICATION

8.RECENT DEVELOPMENTS
 DEFINITION OF CO-OPERATIVE BANKS

A co-operative bank is a financial entity which

belongs to its members, who are at the same time
the owners and the customers of their bank. Co-
operative banks are often created by persons
belonging to the same local or professional
community or sharing a common interest. Co-
operative banks generally provide their members
with a wide range of banking and financial services
(loans, deposits, banking accounts…). Co-operative
banks differ from stockholder banks by their
organization, their goals, their values and their
governance. In most countries, they are supervised
and controlled by banking authorities and have to
respect prudential banking regulations, which put
them at a level playing field with stockholder banks.
Depending on countries, this control and supervision
can be implemented directly by state entities or
delegated to a co-operative federation or central
body.
All the cooperative banks share common features :

• Customer-owned entities: In a co-operative bank,

the needs of the customers meet the needs of the
owners, as co-operative bank members are both. As a
consequence, the first aim of a co-operative bank is not
to maximise profit but to provide the best possible
products and services to its members. Some co-
operative banks only operate with their members but
most of them also admit non-member clients to benefit
from their banking and financial services.

• Democratic member control: Co-operative banks

are owned and controlled by their members, who
democratically elect the board of directors. Members
usually have equal voting rights, according to the co-
operative principle of “one person, one vote”.

• Profit allocation: In a co-operative bank, a

significant part of the yearly profit, benefits or surplus is
usually allocated to constitute reserves. A part of this
profit can also be distributed to the co-operative
members, with legal or statutory limitations in most
cases. Profit is usually allocated to members either
through a patronage dividend, which is related to the
use of the co-operative’s products and services by each
member, or through an interest or a dividend, which is
related to the number of shares subscribed by each
member.
 HISTORY

The Bank was formed in 1872 as the Loan and

Deposit Department of Manchester's Co-operative
Wholesale Society, becoming the CWS Bank four years
later. However, the bank did not become a registered
company until 1971. In 1975, the bank became the first
new member of the Committee of London Clearing Banks
for 40 years, and thus able to issue its own cheques.
Since 1974 the Co-operative Bank has consistently
offered free banking for personal customers who remain
in credit. It was also the first Clearing Bank to offer an
interest bearing cheque account called Cheque & Save,
in 1982. In 1991 the Bank shook the credit card market
when it introduced a guaranteed "free for life" Gold Visa
card.
The Co-operative banks in INDIA have a history of
almost 100 years. The Co-operative banks are an
important constituent of the Indian Financial System,
judging by the role assigned to them, the expectations
they are supposed to fulfil, their number, and the
number of offices they operate. The co-operative
movement originated in the West, but the importance
that such banks have assumed in India is rarely
paralleled anywhere else in the world. Their role in rural
financing continues to be important even today, and
their business in the urban areas also has increased
phenomenally in recent years mainly due to the sharp
increase in the number of primary co-operative banks.
Co operative Banks in India are registered under the Co-
operative Societies Act. The cooperative bank is also
regulated by the RBI. They are governed by the Banking
Regulations Act 1949 and Banking Laws (Co-operative
Societies) Act, 1965.

Establishment of Cooperative Banks in India

INTRODUCTION

Co-operative movement is quite well established in

India. The first legislation on co-operation was passed in
1904. In 1914 the Maclagen committee envisaged a
three tier structure for co-operative banking viz. Primary
Agricultural Credit Societies (PACs) at the grass root
level, Central Co-operative Banks at the district level and
State Co-operative Banks at state level or Apex Level.
The first urban co-operative bank in India was formed
nearly 100 years back in Baroda.
The co-operative banks arrived in India in the
beginning of 20th Century as an official effort to create a
new type of institution based on the principles of co-
operative organisation and management, suitable for
problems peculiar to Indian conditions. These banks
were conceived as substitutes for money lenders, to
provide timely and adequate short-term and long-term
institutional credit at reasonable rates of interest.
In the formative stage Co-operative Banks were
Urban Co-operative Societies run on community basis
and their lending activities were restricted to meeting
the credit requirements of their members. The concept
of Urban Co-operative Bank was first spelt out by Mehta
Bhansali Committee in 1939 which defined on Urban Co-
operative Bank. Provisions of Section 5 (CCV) of Banking
Regulation Act, 1949 (as applicable to Co-operative
Societies) defined an Urban Co-operative Bank as a
Primary Co-operative Bank other than a Primary Co-
operative Society was made applicable in 1966.

MAIN FUNCTIONS OF COOPERATIVE BANKS

1. Co-operative Banks are organised and managed on the
principal of co-operation, self-help, and mutual help. They
function with the rule of "one member, one vote" function
on "no profit, no loss" basis. Co-operative banks, as a
principle, do not pursue the goal of profit maximisation.
Co-operative bank performs all the main banking
functions of deposit mobilisation, supply of credit and
provision of remittance facilities. Co-operative Banks
provide limited banking products and are functionally
specialists in agriculture related products. However, co-
operative banks now provide housing loans also. UCBs
provide working capital loans and term loan as well.
2. Co-operative bank do banking business mainly in the
agriculture and rural sector. However, UCBs, SCBs, and
CCBs operate in semi urban, urban, and metropolitan
areas also. The urban and non-agricultural business of
these banks has grown over the years. The co-operative
banks demonstrate a shift from rural to urban, while the
commercial banks, from urban to rural. Co-operative
Banks belong to the money market as well as to the
capital market. Primary agricultural credit societies
provide short term and medium term loans.
3. Cooperative banks in India finance rural areas under:
· Farming
· Cattle
· Milk
· Hatchery
· Personal finance
4. Cooperative banks in India finance urban areas under:
· Self-employment
· Industries
· Small scale units
· Home finance
· Consumer finance
· Personal finance
Co-operative Banks Types:
There are two types of co-operative banks in INDIA.

1. 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.

2. 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.

CLASSIFICATION OF COOPERATIVE BANKS

Some co-operative banks are scheduled banks, while
others are non-scheduled banks. For instance, SCBs and
some UCBs are scheduled banks but other co-operative
banks are non-scheduled banks. At present, 28 SCBs and
11 UCBs with Demand and Time Liabilities over Rs 50
crore each included in the Second Schedule of the
Reserve Bank of India Act.

Co-operative Banks are subject to CRR and liquidity

requirements as other scheduled and non-scheduled
banks are. However, their requirements are less than
commercial banks.

Sr.N Category of Minimum SLR holding in

o. bank Government and other approved
securities as percentage of Net
Demand and Time Liabilities
 (NDTL)
1. Scheduled 25%
banks
2. Non-
Scheduled
banks
a) with 15%
NDTL of
Rs.25 crore
& above 10%
b) with
NDTL of
less than
Rs.25 crore

Recent Developments
Over the years, primary (urban) cooperative banks have
registered a significant growth in number, size and
volume of business handled. As on 31st March, 2003
there were 2,104 UCBs of which 56 were scheduled
banks. About 79 percent of these are located in five
states, - Andhra Pradesh, Gujarat, Karnataka,
Maharashtra and Tamil Nadu. Recently the problems
faced by a few large UCBs have highlighted some of the
difficulties these banks face and policy endeavours are
geared to consolidating and strengthening this sector
and improving governance.
 There are more than total 297 co-
operative banks in INDIA

IN STATES
Andhra Pradesh 24
Assam 1
Bihar 24
Chhattisgarh 1
Goa 11
Gujarat 21
Haryana 1
Himachal Pradesh 3
Jammu and Kashmir 2
Karnataka 8
Kerala 43
Madhya Pradesh 35
Maharashtra 67
Meghalaya 5
Orissa 2
Rajasthan 13
Tripura 1
Tamil Nadu 2
Uttarakhand 1
Uttar Pradesh 8
West Bengal 14
IN UNION TERRITOREIS
Andaman and Nicobar 2
Islands
Chandigarh 2
Pondicherry 6
 Amyn K
Charaniya
283065 Jigar
Rashesh Lathia
Sheth
283087
283113

Submitt
ed Malcolm
Abizer A
By: Mascarenh
Sabuwala
as
283105
283092

Jaydeep K
Binay Roy
Mehta
283104
283094