{"id":7322,"date":"2024-04-16T12:29:46","date_gmt":"2024-04-16T12:29:46","guid":{"rendered":"https:\/\/www.nextias.com\/blog\/?p=7322"},"modified":"2024-05-28T09:45:44","modified_gmt":"2024-05-28T09:45:44","slug":"cooperative-banks","status":"publish","type":"post","link":"https:\/\/www.nextias.com\/blog\/cooperative-banks\/","title":{"rendered":"Cooperative Banks in India: Meaning, Types, &amp; Significance"},"content":{"rendered":"\n<p><em><strong>Cooperative Banks in India<\/strong> hold a unique place in the country&#8217;s financial landscape due to their conception and working. Offering a community-focused approach to banking, they are crucial for facilitating financial inclusion, particularly in rural and agricultural sectors. This <strong>article of NEXT IAS<\/strong> aims to study Cooperative Banks in detail, including their meaning, types, structure, significance, and more.<\/em><\/p><div id=\"ez-toc-container\" class=\"ez-toc-v2_0_56_1 counter-hierarchy ez-toc-counter ez-toc-transparent ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<span class=\"ez-toc-title-toggle\"><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.nextias.com\/blog\/cooperative-banks\/#What_are_Cooperative_Banks\" title=\"What are Cooperative Banks?\">What are Cooperative Banks?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.nextias.com\/blog\/cooperative-banks\/#Features_of_Cooperative_Banks_in_India\" title=\"Features of Cooperative Banks in India\">Features of Cooperative Banks in India<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.nextias.com\/blog\/cooperative-banks\/#Regulation_of_Cooperative_Banks_in_India\" title=\"Regulation of Cooperative Banks in India\">Regulation of Cooperative Banks in India<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.nextias.com\/blog\/cooperative-banks\/#Difference_between_Commercial_Banks_and_Cooperative_Banks\" title=\"Difference between Commercial Banks and Cooperative Banks\">Difference between Commercial Banks and Cooperative Banks<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.nextias.com\/blog\/cooperative-banks\/#Structure_of_Cooperative_Banks_in_India\" title=\"Structure of Cooperative Banks in India\">Structure of Cooperative Banks in India<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.nextias.com\/blog\/cooperative-banks\/#Urban_Cooperative_Banks_UCBs\" title=\"Urban Cooperative Banks (UCBs)\">Urban Cooperative Banks (UCBs)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.nextias.com\/blog\/cooperative-banks\/#Rural_Cooperative_Banks_RCBs\" title=\"Rural Cooperative Banks (RCBs)\">Rural Cooperative Banks (RCBs)<\/a><ul class='ez-toc-list-level-3'><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.nextias.com\/blog\/cooperative-banks\/#Short-Term_Structures\" title=\"Short-Term Structures\">Short-Term Structures<\/a><ul class='ez-toc-list-level-4'><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/www.nextias.com\/blog\/cooperative-banks\/#State_Cooperative_Banks\" title=\"State Cooperative Banks\">State Cooperative Banks<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/www.nextias.com\/blog\/cooperative-banks\/#District_Cooperative_Central_Banks_DCCBs\" title=\"District Cooperative Central Banks (DCCBs)\">District Cooperative Central Banks (DCCBs)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/www.nextias.com\/blog\/cooperative-banks\/#Primary_Agricultural_Credit_Societies_PACS\" title=\"Primary Agricultural Credit Societies (PACS)\">Primary Agricultural Credit Societies (PACS)<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/www.nextias.com\/blog\/cooperative-banks\/#Long-Term_Structures\" title=\"Long-Term Structures\">Long-Term Structures<\/a><ul class='ez-toc-list-level-4'><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/www.nextias.com\/blog\/cooperative-banks\/#State_Cooperative_Agricultural_and_Rural_Development_Banks_SCARDBs\" title=\"State Cooperative Agricultural and Rural Development Banks (SCARDBs)\">State Cooperative Agricultural and Rural Development Banks (SCARDBs)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/www.nextias.com\/blog\/cooperative-banks\/#Primary_Cooperative_Agricultural_and_Rural_Development_Banks_PCARDBs\" title=\"Primary Cooperative Agricultural and Rural Development Banks (PCARDBs)\">Primary Cooperative Agricultural and Rural Development Banks (PCARDBs)<\/a><\/li><\/ul><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/www.nextias.com\/blog\/cooperative-banks\/#Significance_of_Cooperative_Banks_in_India\" title=\"Significance of Cooperative Banks in India\">Significance of Cooperative Banks in India<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-16\" href=\"https:\/\/www.nextias.com\/blog\/cooperative-banks\/#Banking_Regulation_Amendment_Act_2020\" title=\"Banking Regulation (Amendment) Act, 2020\">Banking Regulation (Amendment) Act, 2020<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-17\" href=\"https:\/\/www.nextias.com\/blog\/cooperative-banks\/#Major_Features_of_the_Act\" title=\"Major Features of the Act\">Major Features of the Act<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-18\" href=\"https:\/\/www.nextias.com\/blog\/cooperative-banks\/#FAQs_on_Cooperative_Banks_in_India\" title=\"FAQs on Cooperative Banks in India?\">FAQs on Cooperative Banks in India?<\/a><ul class='ez-toc-list-level-3'><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-19\" href=\"https:\/\/www.nextias.com\/blog\/cooperative-banks\/#Which_is_the_first_Cooperative_Bank_in_India\" title=\"Which is the first Cooperative Bank in India?\">Which is the first Cooperative Bank in India?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-20\" href=\"https:\/\/www.nextias.com\/blog\/cooperative-banks\/#Who_regulates_Cooperative_Banks_in_India\" title=\"Who regulates Cooperative Banks in India?\">Who regulates Cooperative Banks in India?<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"630\" height=\"350\" src=\"https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/blog\/uploads\/2024\/04\/1-11.png\" alt=\"Cooperative Banks in India\" class=\"wp-image-7336\" srcset=\"https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/blog\/uploads\/2024\/04\/1-11.png 630w, https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/blog\/uploads\/2024\/04\/1-11-460x256.png 460w, https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/blog\/uploads\/2024\/04\/1-11-150x83.png 150w\" sizes=\"auto, (max-width: 630px) 100vw, 630px\" \/><\/figure>\n\n\n\n<h2 class=\"wp-block-heading has-text-color has-link-color wp-elements-34a52128dca315729733319e9023f6f3\" style=\"color:#015aa7\"><span class=\"ez-toc-section\" id=\"What_are_Cooperative_Banks\"><\/span><strong>What are Cooperative Banks?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Cooperative Banks refer to those financial institutions under the <a href=\"https:\/\/www.nextias.com\/blog\/banking-system\/\" data-type=\"link\" data-id=\"https:\/\/www.nextias.com\/blog\/banking-system\/\"><strong>Banking System in India<\/strong><\/a> that <strong>operate on the principles of cooperation and mutual benefit for their members.<\/strong><\/p>\n\n\n\n<h2 class=\"wp-block-heading has-text-color has-link-color wp-elements-c76fca65ad408e440ddfa94c0d5f4e9a\" style=\"color:#015aa7\"><span class=\"ez-toc-section\" id=\"Features_of_Cooperative_Banks_in_India\"><\/span><strong>Features of Cooperative Banks in India<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>They belong to their members who are both the owners and customers of the bank.\n<ul class=\"wp-block-list\">\n<li>Thus, it can be said that the <strong>customers are the owners<\/strong> of these banks.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>Cooperative Banks are named so because these have the cooperation of stakeholders as the motive.<\/li>\n\n\n\n<li>They <strong>operate on the principle of \u201cone person, one vote\u201d <\/strong>in decision making in decision-making and are managed on the basis of cooperation, self-help, and no profit no loss.<\/li>\n\n\n\n<li><strong>Along with lending,<\/strong> these banks <strong>also accept deposits.<\/strong><\/li>\n<\/ul>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-background\" style=\"background-color:#ebecf0\"><tbody><tr><td>&#8211; They are incorporated and <strong>registered under the States\u2019 Cooperative Societies Act<\/strong> passed by the concerned state.<br>&#8211; The National Bank for Agriculture and Rural Development <strong>(NABARD) is the apex body of the cooperative sector in India.<\/strong><\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h2 class=\"wp-block-heading has-text-color has-link-color wp-elements-db9ba291e2eb77f2c795f50a08ba28c9\" style=\"color:#015aa7\"><span class=\"ez-toc-section\" id=\"Regulation_of_Cooperative_Banks_in_India\"><\/span><strong>Regulation of Cooperative Banks in India<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>These banks in India, broadly, come under the dual control of:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Reserve Bank of India<\/strong>: Under the <strong>Banking Regulation Act, 1949<\/strong>, and the <strong>Banking Laws (Application to Co-operative Societies) Act, 1965,<\/strong> the RBI is responsible for regulating banking aspects of these banks, such as capital adequacy, risk control, and lending norms.<\/li>\n\n\n\n<li><strong>Registrar of Co-operative Societies (RCS) of respective State or Central Government:<\/strong> They are responsible for regulation of management-related aspects of these banks, such as incorporation, registration, management, audit, supersession of board of directors, and liquidation.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading has-text-color has-link-color wp-elements-765928dad9ac13a9564f9054a1605556\" style=\"color:#015aa7\"><span class=\"ez-toc-section\" id=\"Difference_between_Commercial_Banks_and_Cooperative_Banks\"><\/span><strong>Difference between Commercial Banks and Cooperative Banks<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-background\" style=\"background-color:#ebecf0\"><thead><tr><th><strong>Basis of Difference<\/strong><\/th><th><strong>Commercial Banks<\/strong><\/th><th><strong>Cooperatives Banks<\/strong><\/th><\/tr><\/thead><tbody><tr><td>Formed as<\/td><td>Joint-stock Banks.<\/td><td>Co-operative organizations.<\/td><\/tr><tr><td>Governing Act<\/td><td>Banking Regulation Act 1949.<\/td><td>Co-operative Societies Act of 1904.<\/td><\/tr><tr><td>Regulation<\/td><td>Subject to the control of the Reserve Bank of India directly.<\/td><td>Subject to the rules laid down by the Registrar of Co-operative Societies.<\/td><\/tr><tr><td>SLR and CRR Requirements<\/td><td>Relatively Higher.<\/td><td>Relatively Lower.<\/td><\/tr><tr><td>Services Offered<\/td><td>Larger scope in offering a variety of banking services.<\/td><td>Lesser scope in offering a variety of banking services.<\/td><\/tr><tr><td>Area of Operation<\/td><td>Large-scale operation, usually countrywide.<\/td><td>Small-scale operation, usually limited to a region.<\/td><\/tr><tr><td>Main functions<\/td><td>Mostly provide short-term finance to industry, trade, and commerce, including priority sectors like exports, etc.<\/td><td>Usually cater to the credit needs of agriculturists.<\/td><\/tr><tr><td>Rate of interest<\/td><td>Offer lower rates of interest on deposits compared to co-op banks.<\/td><td>Offer a slightly higher rate of interest on deposits.<\/td><\/tr><tr><td>Borrowers<\/td><td>Borrowers of commercial banks are only account holders and have no voting power as such, so they cannot have any influence on the lending policy of these banks.<\/td><td>Borrowers are member shareholders, so they have some influence on the lending policy of the banks, on account of their voting power.<\/td><\/tr><tr><td>Flexibility in lending<\/td><td>Commercial banks are free from any rigidities in terms of lending options.<\/td><td>Co-operative banks do have not much scope for flexibility on account of the rigidities of the bylaws of the Co-operative Societies.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h2 class=\"wp-block-heading has-text-color has-link-color wp-elements-158ebfa187521a34ee885ffd3b2a4b94\" style=\"color:#015aa7\"><span class=\"ez-toc-section\" id=\"Structure_of_Cooperative_Banks_in_India\"><\/span><strong>Structure of Cooperative Banks in India<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>These banks, under the Banking System in India, are primarily categorized into &#8211; Rural Cooperative Banks (RCBS), and Urban Cooperative Banks (UCBS). They are further sub-categorised as shown below:<\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"834\" height=\"332\" src=\"https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/blog\/uploads\/2024\/04\/2-12.png\" alt=\"Cooperative Banks \" class=\"wp-image-7337\" srcset=\"https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/blog\/uploads\/2024\/04\/2-12.png 834w, https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/blog\/uploads\/2024\/04\/2-12-460x183.png 460w, https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/blog\/uploads\/2024\/04\/2-12-768x306.png 768w, https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/blog\/uploads\/2024\/04\/2-12-696x277.png 696w, https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/blog\/uploads\/2024\/04\/2-12-150x60.png 150w\" sizes=\"auto, (max-width: 834px) 100vw, 834px\" \/><\/figure>\n\n\n\n<h2 class=\"wp-block-heading has-text-color has-link-color wp-elements-6df951173fc8af3625243c5ad1235a0d\" style=\"color:#015aa7\"><span class=\"ez-toc-section\" id=\"Urban_Cooperative_Banks_UCBs\"><\/span><strong>Urban Cooperative Banks (UCBs)<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>They operate in urban and semi-urban areas.<\/li>\n\n\n\n<li>They mainly lend to small borrowers and businesses.<\/li>\n\n\n\n<li>Based on their regulation regime, they are categorized into two types &#8211; Scheduled Banks and Non-Scheduled Banks.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading has-text-color has-link-color wp-elements-0c3c5c5f0c816f70dc0b9604ea133070\" style=\"color:#015aa7\"><span class=\"ez-toc-section\" id=\"Rural_Cooperative_Banks_RCBs\"><\/span><strong>Rural Cooperative Banks (RCBs)<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>They focus on serving the financial needs of people in rural areas.<\/li>\n\n\n\n<li>Depending on the type of lending, they are divided into <strong>2 sub-categories <\/strong>&#8211; Short-Term Structures, and Long-Term Structures.<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading has-text-color has-link-color wp-elements-8ef3cb542b19e25a88a2a8879f2d42ae\" style=\"color:#ff6a00\"><span class=\"ez-toc-section\" id=\"Short-Term_Structures\"><\/span><strong>Short-Term Structures<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li>They <strong>lend upto 1 year<\/strong> for purposes such as cultivation activities, buying seeds and fertilizers, etc.<\/li>\n\n\n\n<li>They have a <strong>3-tier setup.<\/strong><\/li>\n<\/ul>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"State_Cooperative_Banks\"><\/span><strong>State Cooperative Banks<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Each state has its own State Cooperative Bank, which is the <strong>apex body for cooperative banks in that particular state.<\/strong><\/li>\n\n\n\n<li>They <strong>operate at the state level.<\/strong><\/li>\n\n\n\n<li>It acts as the mediator between RBI and NABARD on the one side and Central or District Cooperative Bank and Primary Agricultural Credit Societies on the other side.<\/li>\n<\/ul>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"District_Cooperative_Central_Banks_DCCBs\"><\/span><strong>District Cooperative Central Banks (DCCBs)<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<ul class=\"wp-block-list\">\n<li>They <strong>operate at the District level.<\/strong><\/li>\n\n\n\n<li>They get loans from the State Cooperative Bank and grant loans to Primary Agricultural Credit Societies and individuals.<\/li>\n<\/ul>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Primary_Agricultural_Credit_Societies_PACS\"><\/span><strong>Primary Agricultural Credit Societies (PACS)<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Primary Agricultural Credit Society (PACS) is a <strong>basic unit<\/strong> and <strong>smallest cooperative credit institution in India.<\/strong><\/li>\n\n\n\n<li>They <strong>operate at the Gram Panchayat and village level.<\/strong><\/li>\n\n\n\n<li>They <strong>provide short-term loans (1 year to 3 years) <\/strong>to its members for agricultural purposes.<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading has-text-color has-link-color wp-elements-0322afbea691297de65b3878969b12c7\" style=\"color:#ff6a00\"><span class=\"ez-toc-section\" id=\"Long-Term_Structures\"><\/span><strong>Long-Term Structures<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li>They <strong>lend <\/strong>to meet <strong>medium and long-term fund requirements (1.5 years \u2013 25 years) <\/strong>for purposes such as land development, purchase of pumps, etc.<\/li>\n\n\n\n<li>They have a<strong> 2-tier set up:<\/strong><\/li>\n<\/ul>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"State_Cooperative_Agricultural_and_Rural_Development_Banks_SCARDBs\"><\/span><strong>State Cooperative Agricultural and Rural Development Banks (SCARDBs)<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>State Cooperative Agriculture and Rural Development Banks (SCARDBs) focus on providing <strong>long-term credit for agricultural and rural development purposes.<\/strong><\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Primary_Cooperative_Agricultural_and_Rural_Development_Banks_PCARDBs\"><\/span><strong>Primary Cooperative Agricultural and Rural Development Banks (PCARDBs)<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>Primary Cooperative Agricultural and Rural Development Banks (PCARDBs) are aimed at <strong>providing financial services to rural areas,<\/strong> especially to small and marginal farmers, agricultural laborers, and rural artisans.<\/p>\n\n\n\n<h2 class=\"wp-block-heading has-text-color has-link-color wp-elements-b40d5f71425717ded3d6d14cfb240f8d\" style=\"color:#015aa7\"><span class=\"ez-toc-section\" id=\"Significance_of_Cooperative_Banks_in_India\"><\/span><strong>Significance of Cooperative Banks in India<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Due to their very nature of working, they play crucial roles in the Indian economy. Some of their major roles can be seen as follows:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Financial Inclusion<\/strong>: By reaching out to the unbanked and underbanked sections of society, they play a crucial role in promoting financial inclusion.<\/li>\n\n\n\n<li><strong>Easy Access to Credit<\/strong>: They offer easy access to credit to their customers that too at competitive interest rates.<\/li>\n\n\n\n<li><strong>Promoting Savings<\/strong>: They encourage saving habits by offering deposit accounts tailored to rural needs.<\/li>\n\n\n\n<li><strong>Local Development<\/strong>: These banks understand local needs better and thus play a significant role in rural development by funding various agricultural and rural development activities.<\/li>\n\n\n\n<li><strong>Rural Development<\/strong>: The majority of these banks operate in rural areas, catering to the specific needs of farmers, small businesses, and low-income households.<\/li>\n\n\n\n<li><strong>Financial Literacy Promotion<\/strong>: They often act as financial literacy educators, empowering rural communities to make informed financial decisions.<\/li>\n<\/ul>\n\n\n\n<p>By enabling easy access to institutional credit to under-banked sections, <strong>Cooperative Banks in India<\/strong> are pivotal in the socio-economic development of the country. Their role remains crucial in the promotion of small industries, self-employment, and businesses that may not meet the stringent requirements of larger banks. With the changing economic and technological landscapes of the country, these banks have the potential to empower more rural and urban communities, driving forward India\u2019s agenda of inclusive growth and economic development.<\/p>\n\n\n\n<h2 class=\"wp-block-heading has-text-color has-link-color wp-elements-c7674baf2d20f2d4e4d089eab0e5b338\" style=\"color:#015aa7\"><span class=\"ez-toc-section\" id=\"Banking_Regulation_Amendment_Act_2020\"><\/span><strong>Banking Regulation (Amendment) Act, 2020<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>In light of the crises related to some UCBs, the Banking Regulation Act, 1949 was amended through the Banking Regulation (Amendment) Act, 2020. It is aimed to bring all the UCBs and Multi-State Cooperative Banks under the direct supervision of the <a href=\"https:\/\/www.nextias.com\/blog\/reserve-bank-of-india-rbi\/\" data-type=\"link\" data-id=\"https:\/\/www.nextias.com\/blog\/reserve-bank-of-india-rbi\/\"><strong>Reserve Bank of India (RBI)<\/strong><\/a>.<\/p>\n\n\n\n<h2 class=\"wp-block-heading has-text-color has-link-color wp-elements-e795124ccf7255958da54c96341bde14\" style=\"color:#015aa7\"><span class=\"ez-toc-section\" id=\"Major_Features_of_the_Act\"><\/span><strong>Major Features of the Act<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Earlier, the Co-operative Banks were exempted from several provisions of the Banking Regulation Act, 1949. The 2020 Amendment Act applies some of these provisions to them, making their regulation under the Act similar to that of <a href=\"https:\/\/www.nextias.com\/blog\/commercial-banks\/\" data-type=\"link\" data-id=\"https:\/\/www.nextias.com\/blog\/commercial-banks\/\"><strong>commercial banks<\/strong><\/a>.<\/li>\n\n\n\n<li>It seeks to <strong>expand RBI regulatory control<\/strong> over cooperative banks with respect to management, capital, audit, and winding up.<\/li>\n\n\n\n<li>The RBI may prescribe conditions and qualifications for the employment of the Chairman of these banks. (Previously, it was allowed only for multi-state cooperative banks.)\n<ul class=\"wp-block-list\">\n<li>RBI may remove a Chairman who does not meet \u2018fit and proper\u2019 criteria and appoint a suitable person.<\/li>\n\n\n\n<li>It may issue directions to reconstitute the Board of Directors in order to ensure a sufficient number of qualified members.<\/li>\n\n\n\n<li>The RBI may supersede the Board of Directors of a cooperative bank after consultation with the State Government.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>It allows the RBI to undertake mergers and restructuring of a bank in the public interest, without having to order a moratorium, which not only limits withdrawals by depositors but also disrupts the bank\u2019s lending operations.\n<ul class=\"wp-block-list\">\n<li>Previously, RBI had to first place a bank under a moratorium before preparing a revival scheme for stressed banks, and during the moratorium, no legal action could be initiated.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>The audit of these banks would be conducted on par with scheduled commercial banks.<\/li>\n\n\n\n<li>Certain provisions relating to winding up and special provisions for speedy disposal of winding up proceedings of banks will now be applicable to these banks.<\/li>\n\n\n\n<li>The amendment act does not affect the existing powers of the State Registrars of Co-operative Societies under state cooperative laws.<\/li>\n\n\n\n<li>The amendments do not apply to Primary Agricultural Credit Societies (PACS) or co-operative societies whose primary object and principal business is long-term finance for agricultural development.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading has-text-color has-link-color wp-elements-d05208d3364e36294d4fbe6aa494c2c6\" style=\"color:#015aa7\"><span class=\"ez-toc-section\" id=\"FAQs_on_Cooperative_Banks_in_India\"><\/span><strong>FAQs on Cooperative Banks in India?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n<div id=\"rank-math-faq\" class=\"rank-math-block\">\n<div class=\"rank-math-list \">\n<div id=\"faq-question-1713268031699\" class=\"rank-math-list-item\">\n<h3 class=\"rank-math-question \"><span class=\"ez-toc-section\" id=\"Which_is_the_first_Cooperative_Bank_in_India\"><\/span><strong>Which is the first Cooperative Bank in India?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<div class=\"rank-math-answer \">\n\n<p>The first Cooperative Bank in India was the <strong>Anyonya Co-operative Bank (ACBL)<\/strong>, <strong>established in 1889 in Vadodara, Gujarat<\/strong>. It is no longer operational now.<\/p>\n\n<\/div>\n<\/div>\n<div id=\"faq-question-1713268043493\" class=\"rank-math-list-item\">\n<h3 class=\"rank-math-question \"><span class=\"ez-toc-section\" id=\"Who_regulates_Cooperative_Banks_in_India\"><\/span><strong>Who regulates Cooperative Banks in India?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<div class=\"rank-math-answer \">\n\n<p>They come under the dual control of the Reserve Bank of India and the Registrar of Cooperative Societies of the respective state or central government. While the RBI regulates the banking aspects, the Registrar of Co-operative Societies regulates management-related aspects of these banks.<\/p>\n\n<\/div>\n<\/div>\n<\/div>\n<\/div>","protected":false},"excerpt":{"rendered":"<p>Cooperative Banks in India hold a unique place in the country&#8217;s financial landscape due to their conception and working. <\/p>\n","protected":false},"author":9,"featured_media":8194,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[62],"tags":[72],"class_list":["post-7322","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-indian-economy","tag-gs-3"],"_links":{"self":[{"href":"https:\/\/www.nextias.com\/blog\/wp-json\/wp\/v2\/posts\/7322","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nextias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nextias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/blog\/wp-json\/wp\/v2\/users\/9"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/blog\/wp-json\/wp\/v2\/comments?post=7322"}],"version-history":[{"count":13,"href":"https:\/\/www.nextias.com\/blog\/wp-json\/wp\/v2\/posts\/7322\/revisions"}],"predecessor-version":[{"id":7759,"href":"https:\/\/www.nextias.com\/blog\/wp-json\/wp\/v2\/posts\/7322\/revisions\/7759"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/blog\/wp-json\/wp\/v2\/media\/8194"}],"wp:attachment":[{"href":"https:\/\/www.nextias.com\/blog\/wp-json\/wp\/v2\/media?parent=7322"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nextias.com\/blog\/wp-json\/wp\/v2\/categories?post=7322"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nextias.com\/blog\/wp-json\/wp\/v2\/tags?post=7322"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}