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7/29/2019 Co-Operative Banks Svims

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Co-Operative banks


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Definition

A co-operative bank is a financial entity which belongsto its members, who are at the same time the ownersand the customers of their bank.

Co-operative banks are often created by persons

belonging to the same local or professional communityor sharing a common interest.

Cooperative banks generally provide their memberswith a wide range of banking and financial services(loans, deposits, banking accounts).

In India co-operative banks are regulated with the RBIand governed by Banking Regulations Act 1949 and Co-operative Societies Act, 1965


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History

The Bank was formed in 1872 in the city Manchester in UK.The Co-operative banks in INDIA have a history of almost100 years. The Co-operative banks are an importantconstituent of the Indian Financial System. Co operativeBanks in India are registered under the Co-operativeSocieties Act. The cooperative bank is also regulated by theRBI. They are governed by the Banking Regulations Act1949 and Banking Laws(Co-operative Societies) Act, 1965.

These banks were conceived as substitutes formoneylenders.


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Establishments

Co-operative bank performs all the main banking functionsof deposit mobilization, supply of credit and provision ofremittance facilities.

Co-operative Banks provide limited bankingproducts and are functionally specialists in agriculturerelated products. However, co-operative banks now providehousing loans also.

UCBs provide working capital loans and term loan as well.


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Features

Customer-owned entities

In a co-operative bank, the needs of the customersmeet the needs of the owners, as co-operative bankmembers are both owners and customers.

Democratic member control

Co-operative banks follow the principle of one person,one vote.

Profit allocationProfit is usually allocated to members which is relatedto the number of shares subscribed by each member.


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Functions

Co-operative Banks are organized and managed on the principal ofco-operation, self-help, and mutual help.

They work on the basis ofno profit no loss. Profit maximization isnot their goal

Co-operative bank do banking business mainly in the agricultureand rural sector. However, UCBs, SCBs, and CCBs operate in semiurban, urban, and metropolitan areas also.

The State Co-operative Banks (SCBs), Central Co-operative Banks(CCBs) and Urban Co-operative Banks(UCBs) can normally extendhousing loans up to Rs 1lakh to an individual. The scheduled UCBs,however, can lend up to Rs 3 lakh for housing purposes. The UCBscan provide advances against shares and debenture


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Finance Function:

1. Cooperative banks in India finance rural areas under:

Farming

Cattle

Milk

Personal finance

2. Cooperative banks in India finance urban areas under:

Self-employment

Industries Small scale units

Home finance

Consumer finance

Personal finance


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1. The Andaman and Nicobar State Co-operative Bank Ltd.

2.The Andhra Pradesh State Co-operative Bank Ltd.

3. The Arunachal Pradesh State co-operative Apex Bank Ltd.4. The Assam Co-operative Apex Bank Ltd.

5. The Bihar State Co-operative Bank Ltd.

6. The Chandigarh State Co-operative Bank Ltd.

7. The Delhi State Co-operative Bank Ltd.

.

8. The Goa State Co-operative Bank Ltd.

9. The Gujarat State Co-operative Bank Ltd.

10. The Haryana State Co-operative Apex Bank Ltd.

11. The Himachal Pradesh State Co-operative Bank Ltd.


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12. The Jammu and Kashmir State Co-operative Bank Ltd.

13. The Karnataka State Co-operative Apex Bank Ltd..

14. The Kerala State Co-operative Bank Ltd.

15. The Madhya Pradesh Rajya Sahakari Bank

16. The Maharashtra State Co-operative Bank Ltd.

17. The Manipur State Co-operative Bank Ltd.

18. The Meghalaya Co-operative Apex Bank Ltd.

19. The Mizoram Co-operative Apex Bank Ltd.

20. The Nagaland State Co-operative Bank Ltd.

21. The Orissa State Co-operative Bank Ltd.

22. The Pondichery State Co-opertive Bank Ltd.

23. The Punjab State Co-operative Bank Ltd.


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23. The Rajasthan State Co-operative Bank Ltd..

24. The Sikkim State Co-operative Bank Ltd.

25. The Tamil Nadu State Apex Co-operative Bank Ltd.

26. The Tripura State Co-operative Bank Ltd.

27. The Uttar Pradesh Co-operative Bank Ltd..

28 The West Bengal State Co-operative Bank Ltd.

29 The Chhattisgarh RajyaSahakari Bank Maryadit

30. The Uttaranchal Rajya Sahakari Bank Ltd.


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Structure of Co-operative Banking

Structure of Co-operative Banking

Urban Co-operative Banks Rural Co-operative

Credit Banks


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Rural Co-operative Credit Banks

Short term Credit

Co- Operative banksLong term credit

Co- operative banks


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Short term Credit Co- Operative banks

Short term credit is supplied by three set of

institutions

1. Primary agricultural credit society (PACS)

2. District central co-operative banks (DCCB)

3. State co- operative banks (SCB)


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Long term credit Co- operative banks

Long term credit is provided by 2 set of

institutions

1. Primary Co- operative agriculture and rural

development banks (PCARDB)

2. State Co- operative agriculture and rural

development banks


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Primary Agricultural Credit Societies (PACS)

PACS provide short and medium term credit to their members for

productive purposes The PACSs function at the base of the co-operative credit system.

It may be organized by ten or more persons normally belongingto a village or a cluster of villages

The societies raise funds by way of share capital, deposits frommembers and non-members and loans from DCCBs.

The membership fee and share capital of PACS is nominal so thateconomically weakest sections of the society can becomemember

PACS acts as the link between the rural borrowers on the oneside and the higher agencies on the other viz. District co-operative Bank, State co-operative bank, Government and theNABARD

The borrowing powers of members as well as society is limited.


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Functions of PACS

Accepting deposits from members and non-members

To provide short term and medium term loan at right

time concentrating on small and marginal farmers To distribute agricultural equipments, fertilizers, seeds,

insecticides and other inputs to farmers

To distribute food grains and other necessary goods

To provide storage facilities to farmers for theiragricultural produces

To provide non farm credit to its members


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District Co- Operative Bank

Functions: To act as a balancing centre of finance for the primary

societies in the district by providing them funds when theyface shortage

To provide financial assistance to members at a low rate of

interest

To supervise and control the working of the primary societies

To attract local deposits for strengthening co operative activity

To advise and guide the primary societies

To develop and extent banking facilities in rural areas

To act as a connecting link between primary societies andApex bank

To provide facilities for the healthy growth of co- operative

movement


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Sources of Fund

Share capital

Membership fees

Reserve funds

Accepting deposits from the public ,primarysocieties

Deposits of reserve fund of primary society

Loans from state co-operative banks,government, NABARD, State bank of India

Grants from Government


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Lending by DCB

DCBs finance mainly to its own members andhave no choice in the investments of its funds

These banks have to invest major portion of theirresources in agricultural loans

The main function is to lend to primary creditsociety

They also lend directly to the public for nonagricultural purposes within the area of operation


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State Co-operative banks (SCBs)

SCBs are the Apex institution in the three tier co-operative credit structure, operating at the state level

SCBs finance, control and coordinate the working ofthe credit co- operative banks

RBI finance agriculture through SCBs SCBs raises resources and channelizes them through

district cooperative banks for both agricultural and nonagricultural purposes

SCBs also channelizes the refinance provided byNABARD

In each state there will be state co-operative bank


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Functions of SCBs

Providing financial assistance to the central co-operative banks and other Apex co-operativeinstitution in the state

Coordinating and controlling the activities of thecentral co-operative banks

Formulating and implementing of co-operative creditpolicies of the state

Acting as a link between co-operative credit institutionin the state with RBI and NABARD

Performing ordinary businesslike acceptance ofdeposits, lending money, collection of cheques etc.


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Sources of fund

By issue of shares

Borrowing from state govt.,RBI,NABARD andSBI

Accepting deposits from the public

Reserves and surplus


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Long term credit Co- operative banks

Long term credit Co- operative banks has 2 tier

systems two-tier structure with central land

development banks at the state level and

primary land development banks at talukalevel or district level.

State Land development banks

Primary land development banks


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The banks of Tamil Nadu, Andhra Pradesh, Karnatakaare of this (two-tier) type.

In states like Gujarat, UP, and Jammu & Kashmir there

is unitary structure, i.e., the Apex Land Development

Banks operate directly through their own branches at the

district or taluka level.

The LDBs obtain funds mainly by the issue of long-term

debentures. Such debentures carry the guarantee of thestate government and are subscribed by the central and

state governments, commercial banks, life insurance

corporation and RBI.


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Urban Co-operative Banks

History

The success of co-operative movement in Britain andGermany led to the set of UCBs in India

The enactment of Co-operative credit society act of 1904gave the real impetus to the movement.

The first Urban co-operative credit society was registered inKanjivaram (madras)

In 1915 Maclagam committee was appointed to review theirperformance and suggest measures to strengthen them.

After that many committees like Varde committee,Madhavascommittee The Hate committee were formed from time totime for strengthening the UCBs


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Functions

Urban co-operative banks provide banking andcredit facilities to urban and semi urbanpopulation.

The term Urban Co-operative Banks (UCBs),refers to primary cooperative banks located inurban and semi-urban areas.

These banks, till 1996, were allowed to lendmoney only for non-agricultural purposes..

They lent to small borrowers and businesses.

Today, their scope of operations has widened.


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Duality of control

Primary urban co-operative banks are under

the dual control of Co-operative societies and

RBI


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Role of RBI in Urban co-operative

banks

RBI regulates and supervises the activities of

Urban co-operative Banks. There is separate

department in RBI viz. Urban banks

department It perform 3 main functions

1. Regulatory functions

2. Supervisory functions

3. Developmental functions


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Regulatory functions includes licensing of new

primary co-operative banks, existing banks ,

branch licensing

Supervisory functions relates to on site and off

site inspection of these banks by RBI.

Developmental functions include refinance

facilities by RBI. The refinance is given at the

Bank rate.


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Facts

There are about 1700 UCBs with a total networkof 7,500 branches and these societies constituteabout 10% of the aggregate banking business

Some of them are authorised dealers of foreignexchange

About 79% of UCBs are located in 5 states,viz.AndhraPradesh,Gujrat,Karnataka,Maharashtra

and Tamilnadu and they account for nearly 82%ofthe total deposits and advances of the urbanbanking system

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