Banks in India can be broadly classified under two heads — commercial banks and co-operative banks. While Commercial banks are both nationalized and private banks which are very important for an economy, co-operative banks also play an important role. They include retail and commercial banking organised on a cooperative basis.
Initially, the co-operative banks were set up to supply rural credit, particularly money lenders, today they serve various needs like of agriculture and other allied activities, rural-based industries and to a lesser extent, trade and industry in urban centers.
Co-operative banks have more than one head like the RBI, the Registrar of Co-operative Societies (RCS) and NABARD.
Co-operative banks have a three tier structure — primary (agriculture or urban) credit societies, district central co-operative banks and at the apex level, state co-operative banks.
Co-operative banks are registered under the Cooperative Societies Act, 1912. They are regulated by the Reserve Bank of India under the Banking Regulation Act,1949 and Banking Laws (Application to Cooperative Societies) Act, 1965.
Urban Co-operative Banks
- Primary (urban) co-operative banks are registered and governed by state governments under the respective co-operative societies acts of the concerned states.
- Primary (urban) credit societies have to meet certain criteria in order to get license from RBI.
- The area of operation of primary (urban) co-operative banks is confined to metropolitan, urban or semi-urban centres and caters to the needs of small borrowers including retail traders, small entrepreneurs, professionals and the salaried class.
District Central Co-operative Banks and State Co-operative Banks
- Co-operative banks which work at the district level are district central co-operative banks.
- While Co-operative banks which work at the state level are state co-operative banks.
Earlier these two tiers were also under the supervision of the RBI. After the establishment of National Bank of Agriculture and Development (NABARD) in 1982, there supervision is passed to NABARD.
Anyonya Co-operative Bank Limited (ACBL) organized in 1889 as Anyonya Sahayakari Mandali Co-operative Bank Limited, located in the city of Vadodara (formerly Baroda) in Gujarat, is the first co-operative bank in India.