Co-Operative banks

Definition
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. Cooperative banks generally provide their members with a wide range of banking and financial services (loans, deposits, banking accounts). In India co-operative banks are regulated with the RBI and governed by Banking Regulations Act 1949 and Cooperative Societies Act, 1965

History
The Bank was formed in 1872 in the city Manchester in UK. 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. 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. These banks were conceived as substitutes for moneylenders.

Establishments
Co-operative bank performs all the main banking functions of deposit mobilization, 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.

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 owners and customers. Democratic member control Co-operative banks follow the principle of one person, one vote. Profit allocation Profit is usually allocated to members which is related to the number of shares subscribed by each member.

Functions
Co-operative Banks are organized and managed on the principal of co-operation, self-help, and mutual help. They work on the basis of no profit no loss. Profit maximization is not their goal

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

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

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.

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.

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.

Structure of Co-operative Banking Structure of Co-operative Banking

Urban Co-operative Banks

Rural Co-operative Credit Banks

Rural Co-operative Credit Banks

Short term Credit Co- Operative banks

Long term credit Co- operative banks

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)

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

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 belonging to a village or a cluster of villages The societies raise funds by way of share capital, deposits from members and non-members and loans from DCCBs. The membership fee and share capital of PACS is nominal so that economically weakest sections of the society can become member PACS acts as the link between the rural borrowers on the one side and the higher agencies on the other viz. District cooperative Bank, State co-operative bank, Government and the NABARD The borrowing powers of members as well as society is limited.

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 their agricultural produces To provide non farm credit to its members

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 they face 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 and Apex bank To provide facilities for the healthy growth of co- operative movement

Sources of Fund Share capital Membership fees Reserve funds Accepting deposits from the public ,primary societies Deposits of reserve fund of primary society Loans from state co-operative banks, government, NABARD, State bank of India Grants from Government

Lending by DCB DCBs finance mainly to its own members and have no choice in the investments of its funds These banks have to invest major portion of their resources in agricultural loans The main function is to lend to primary credit society They also lend directly to the public for non agricultural purposes within the area of operation

State Co-operative banks (SCBs)

SCBs are the Apex institution in the three tier cooperative credit structure, operating at the state level SCBs finance, control and coordinate the working of the credit co- operative banks RBI finance agriculture through SCBs SCBs raises resources and channelizes them through district cooperative banks for both agricultural and non agricultural purposes SCBs also channelizes the refinance provided by NABARD In each state there will be state co-operative bank

Functions of SCBs Providing financial assistance to the central cooperative banks and other Apex co-operative institution in the state Coordinating and controlling the activities of the central co-operative banks Formulating and implementing of co-operative credit policies of the state Acting as a link between co-operative credit institution in the state with RBI and NABARD Performing ordinary businesslike acceptance of deposits, lending money, collection of cheques etc.

 Sources of fund By issue of shares Borrowing from state govt.,RBI,NABARD and SBI Accepting deposits from the public Reserves and surplus

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 taluka level or district level. State Land development banks Primary land development banks

 The banks of Tamil Nadu, Andhra Pradesh, Karnataka are 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 the state government and are subscribed by the central and state governments, commercial banks, life insurance corporation and RBI.

Urban Co-operative Banks

History The success of co-operative movement in Britain and Germany led to the set of UCBs in India The enactment of Co-operative credit society act of 1904 gave the real impetus to the movement. The first Urban co-operative credit society was registered in Kanjivaram (madras) In 1915 Maclagam committee was appointed to review their performance and suggest measures to strengthen them. After that many committees like Varde committee,Madhavas committee The Hate committee were formed from time to time for strengthening the UCBs

Functions
Urban co-operative banks provide banking and credit facilities to urban and semi urban population. The term Urban Co-operative Banks (UCBs), refers to primary cooperative banks located in urban and semi-urban areas. These banks, till 1996, were allowed to lend money only for non-agricultural purposes.. They lent to small borrowers and businesses. Today, their scope of operations has widened.

Duality of control Primary urban co-operative banks are under the dual control of Co-operative societies and RBI

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

 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.

Facts
There are about 1700 UCBs with a total network of 7,500 branches and these societies constitute about 10% of the aggregate banking business Some of them are authorised dealers of foreign exchange About 79% of UCBs are located in 5 states, viz.AndhraPradesh,Gujrat,Karnataka,Maharashtra and Tamilnadu and they account for nearly 82%of the total deposits and advances of the urban banking system