1. Summary
  2. Advantages of Cooperative Banks
  3. Demerits of Indian Cooperative Bank
  4. Measures taken for cooperative banks
  5. Conclusion


Co-operative banks are monetary entities established on a cooperative basis and happiness to their members. This implies that the purchasers of a cooperative bank are its house owners. These banks offer a good variety of normal banking and monetary services. Let’s see the merits and measures taken to faces the challenges in cooperative banking

Advantages of Cooperative Banks

Easy to make: Registration and legal needs are relatively straightforward compared to ancient banks. It takes a gaggle of 10 adults to make a cooperative bank. It desires a base capital of twenty-five lakhs solely as compared to a hundred crores of little Finance Banks.

Alternative credit supply: One of the objectives of the cooperative system is to produce straightforward accessibility to the agricultural section of the country therefore on defend them from the clutches of greedy cash lenders. These cash lenders exploit the impoverished by providing credit facilities at higher rates and by manipulating their accounts. It acts as a good various to the current ancient cash loaning system.

Cheap credit: It provides low-cost credit to rural plenty. It provides a high-interest rate to members for her investments and a low loaning rate. This additionally protects the agricultural plenty from the outrageous rate at that cash loaner provides credit, therefore breaking their monopoly.

Encouragement of savings and investments: It has inspired the habit of thrift among the plenty rather than signboard cash or payment unnecessarily, plenty tend to speculate and save their cash.

Advancement in farming: Cooperative societies offer credit to agriculturalists at cheaper rates to shop for inputs, deposition facilities, selling help, and alternative facilities. These banks usually offer help for purchasing low-cost merchandise and services and facilitate them by introducing them to trendy technology and higher farming strategies to boost their output.

Demerits of Indian Cooperative Bank

Small capital base: Cooperative banks have a low capital base because it will begin with a capital base of twenty-five lakhs, creating it troublesome for them to account for some of such capital as their assets and raising assets has been a significant hurdle for nearly all cooperative banks.

Political interference: Politicians use them to extend their vote bank and typically get their representatives electoral over the board of administrators to achieve undue benefits like sanctionative of loans that later gets written off.

RBI direction: The direction of tally isn’t as rigorous on cooperative banks as compared to industrial banks. Tally inspects the books of those banks just once a year.

Dual management: Cooperative banks are controlled below the twin system, i.e. by tally and by their several governments that pose a haul in coordination and management.

Professional management and technological advancement: The cooperative banks are usually reluctant to adopt new technologies like computerized knowledge management. Skilled management within the banks is commonly missing thanks to lack of coaching of personnel attributable to lack of funds.

Dependence of finance: Cooperative banks rely heavily on the tally, NABARD, and therefore the government for refinancing facilities. It depends on the government for capital instead of on its members.

Overdue loans: Overdue loans of cooperative banks are increasing yearly, proscribing the exercise of funds that successively affects the loaning and borrowing capability of the bank.

Measures taken for cooperative banks

PMC Bank isn’t the primary cause of the failure of the cooperative industry. The Madhavpura Cooperative Bank scam in 2001-02 was a transparent signal to bring bound changes within the regulative and superordinate structure of cooperative banks. However, no heed was given at that point. Since then, urban cooperative banks are failing with frightening regularity. Their numbers fell from 1,926 in 2004 to 1,551 in 2018, as per tally knowledge. These problems have to be compelled to be self-addressed and remedied if the government needs the general public to put their trust within the country’s industry.

In 2015, the tally panel below R. Gandhi, a former deputy governor at the financial organization, had planned many governance reforms for the cooperative banking sector, a number of that are as follows:

  • Greater management and direction of tally upon the cooperative banks.
  • These banks and alternative monetary establishments ought to be professionally managed, which suggests that the board of administrators ought to be delegated power the same as those delegated below industrial banks. The Board of administrators ought to be able to conduct a freelance assessment and supervise the bank’s functioning. They must be able to question the shareholder’s illustration.
  • The committee additionally counselled bound changes in Banking Regulation Act, 1949, therefore on increase the reach of power of tally to finish up and liquidate banks while not involving alternative regulators below the cooperative societies’ laws.
  • Conversion of UCBs into little finance banks by tally ought to be allowed subject to fulfilment of bound conditions.
  • Creation of umbrella organization for direction and coordination of the activities of all cooperatives. Such organization ought to be over and on top of the board of administrators and may be reportage on totally therefore on bring it below higher management.


Cooperative banks play integral half within the implementation of development plans and are vital for the effective functioning of the industry in Bharat. Bharat is termed as an under banked country, and once such a big amount of scams, it’s would like of the hour to require necessary measures to remedy the lucane and to spice up the arrogance and trust of the general public within the industry.