Co-operative Banks

In 20th century ,rural people were not able to access the commercial banks (specially farmers ).They used to borrow money from the lender in villages who used to charge high interest rate .To eliminate this problem and practice , a concept of Cooperative Banks came in 1904.

Let’s understand  first the Cooperative Banks in our country.

It is a powerful Cooperative institution which engaged in Banking along with marketing , distribution ,servicing ,production and processing.It function in both rural and urban area.In rural area they finance and help under Farming, Milk , Cattle , Hatchery.and Personal finance while In they finance in urban area under Self Employment ,Small Scale Unit ,Home Finance ,Personal loan.

Co-operative Banks are required to maintain a Statuatory Liquid Ratio (SLR) equivalent to net demand and bank liabilities .

Here are some feature of Cooperative Banks.

• They are organized and managed on the principle of co-operation ,self help, and mutual help.
• They function on “no profit ,no loss ” basis.Cooperative banks ,by their nature,don’t pursue the profit maximization.
• They perform all the main function of deposit mobilization ,supply of credit and provision of remittance facilities .however range of service offered is narrower than in comparison to commercial banks.
• They are the first govt sponsored,govt-subsidized financial agency in India.they get financial help from central govt, state govt , RBI and NABARD. There is no risk of nationalization .
• Cooperative banks belong to both Capital market as well as Money market.
• Co-operative Banks have played a vital role in development of short term and long term  rural credit structure. The co-operative credit endeavour is said to be the first ever attempt at micro credit dispensation in India.IT has a market share of about 40% of total rural credit in country.

In next article I would like to discuss in short about the Regulation Types and Structure of Co-operative Banks.

Click here for government certification in Accounting, Banking & Finance