- Cooperative banks
- Characteristics of Cooperative Bank
- Functions of Cooperative Banks
- Structure of Cooperative Banks in India
- Types of Cooperative Banks in India
A cooperative bank may be a money entity that belongs to its members, at the identical time the house owners and also the customers of their bank. It’s typically established by individuals’ happiness to identical native or skilled community having a typical interest. It’s shaped to market the up-liftment of financially weaker sections of the society to shield them from the clutches of cash lenders offer loans at an immoderately high-interest rate to the poverty-stricken. The cooperative structure is intended on the principles of cooperation, mutual facilitation, democratic higher cognitive process, and open membership. It follows the principle of ‘one stockholder, one vote’ and ‘no profit, no loss.
Characteristics of Cooperative Bank
Customer-owned entities: The members of cooperative banks are the house owners and also the customers of the bank. Thus, the aim of the cooperative bank isn’t to maximize profits but to supply the most effective potential services to its members. A number of the cooperative banks additionally admit non-members thus on offer them banking services.
Democratic member management: Cooperative banks are owned and controlled by members, democratically elects the board of administrators. The essential principle of co-operatives “one man one vote” is followed, regardless of the number of shares controlled by a member that ensures that no member enjoys any absolute power over alternative members.
Profit allocation: A specified portion of the profits are transferred to Statutory Reserve and alternative reserves, and so a good rate of interest is paid on the capital signed by the members. A district of this profit also can be distributed to the co-operative members, with legal and statutory limitations in most cases.
Functions of Cooperative Banks
- It provides money help to individuals with little suggests that and protects them from the latches of cash lenders providing loans and alternative services at the next rate at the expense of the poverty-stricken.
- It supervises and guides related societies.
- Rural finance- It provides financing to rural sectors like kine farming, crop farming, hatching, etc. at relatively lower rates.
- Urban finance- it provides financing for little scale industries, personal finance, home finance, etc.
- It mobilizes funds from its members and provides interest on the invested with capital
- Objectives of Cooperative Banks
- To offer rural finance and micro-financing.
- To take away the dominance of cash lenders and middlemen.
- To offer credit services to agriculturalists and weaker sections of the society at relatively lower rates.
- To offer resource and private money services to little scale industries, housing money help, etc.
- To offer basic banking services to its members.
- To promote the general development of rural areas.
Structure of Cooperative Banks in India
The co-operative banking structure in India is split into Short term structure and long-run structure.
Short term structure has 3 levels
- A State Co-operative Bank works at the apex level (i.e. works at the state level).
- The Central Co-operative Bank works at the Intermediate Level (i.e. works at district level).
- Primary Co-operative Credit Societies at a base level (i.e. works at village level).
- Long term structure has 2 levels
- State Co-operative Agriculture and Rural Development Banks (SCARDBs) at the apex level.
- Primary Co-operative Agriculture and Rural Development Banks (PCARDBs) at the district level or block level.
Types of Cooperative Banks in India
The co-operative banking structure in India is split into the subsequent five categories:
Primary Co-operative Credit Society
- The Primary Co-operative Credit Society is the borrowers and non-borrowers residing in an exceedingly specific neighborhood.
- The funds of the society are derived from the share capital and deposits of members and loans from central cooperative banks.
- Borrowing constitutes the foremost vital part of their assets.
- The borrowing powers of the members yet as of the society are mounted, however, could take issue from state to state.
- The loans are given to members for the acquisition of kine, fodder, fertilizers, and pesticides.
Central Co-operative Banks
- These are federations of primary credit societies in an exceeding district and are of 2 types:
- Those having a membership of primary societies solely.
- Those are having a membership of societies yet as people.
- The funds of the bank accommodates share capital, deposits, loans, and overdrafts from state cooperative banks and joint stocks.
- These banks offer finance to member societies inside the boundaries of the borrowing capability of societies.
- They additionally conduct all the business of a joint-stock bank.
State Co-operative Banks
- The state co-operative bank may be a federation of central co-operative banks and acts as a watchdog of the co-operative banking structure within the state.
- It procures funds from share capital, deposits, loans, and overdrafts from the banking concern of India.
- The state co-operative banks lend cash to central co-operative banks and first societies and in a roundabout way to the farmers.
- These are organized in three tiers, namely; state, central, and first level with the target to fulfill the long run credit necessities of the farmers for organic process functions.
- National Bank for Agriculture and Rural Development (NABARD) supervises exploitation banks.
- The sources of funds for these banks are the debentures signed by each Central and government as these banks don’t settle for deposits from the overall public.
Urban Co-operative Banks
- It refers to primary cooperative banks placed in urban and semi-urban areas.
- Earlier the scope of those banks was restricted, which currently has been significantly widened.
- They offer funds and services to little borrowers and tiny businesses.