CO-OPERATIVE BANKING 2017
CHAPTER-1
INTRODUCTION TO CO-OPERATIVE BANKING
DEFINATION:
“A Co-operative bank, as its name indicates is an institution consisting of a
number of individuals who join together to pool their surplus savings for the
purpose of eliminating the profits of the bankers or money lenders with a
view to distributing the same amongst the depositors and borrowers.”
The Co-operative Banks Act, of 2007 (the Act) defines a co-operative bank
as a co-operative registered as a co-operative bank in terms of the Act whose
members –
1. are of similar occupation or profession or who are employed by a
common employer or who are employed within the same business
district; or
2. have common membership in an association or organisation,
including a business, religious, social, co-operative, labour or
educational group; or
3. have common membership in an association or organisation,
including a business, religious, social, co-operative, labour or
educational group; or
4. Reside within the same defined community or geographical area
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CO-OPERTIVE BANKING - AN INTRODUCTION:
Co-operative bank, in a nutshell, provides financial assistance to the people
with small means to protect them from the debt trap of the moneylenders. It
is a part of vast and powerful structure of co-operative institutions which are
engaged in tasks of production, processing, marketing, distribution, servicing
and banking in India. 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. These
banks generally provide their members with a wide range of banking and
financial services (loans, deposits, banking accounts…). Co-operative banks
differ from stockholder banks by their organization, their goals, their Values
and their governance.
The Co-operative Banking System in India is characterized by a relatively
comprehensive network to the grass root level. This sector mainly focuses on
the local population and micro- banking among middle and low income strata of
the society. These banks operate mainly for the benefit of rural areas,
particularly the agricultural sector.
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OBJECTIVES OF STUDY
The Objective of the study of Co-operative Banking is to know the origin of
Co-operative Banks in India.
1.To know the role of Co-operative banks in India.
2.To know the importance of Co-operative Banks in India.
3.To know the types of Co-operative Banks.
4.To know the Development of Co-operative Banks in India.
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CHAPTER-2
ORIGIN AND OPERATION OF CO-OPERATIVE
BANKING
ORIGIN OF CO-OPERATIVE BANKING:
The beginning co-operative banking in India dates back to about 1904, when
official efforts were made to create a new type of institution based on
principles of co-operative organization & management, which were
considered to be suitable for solving the problems peculiar to Indian
conditions.
The philosophy of equality, equity and self help gave way to the thoughts of
self responsibility and self administration which resulted in giving birth of
co-operative. The origin on co-operative movement was one such event-
arising out of a situation of crisis, exploitation and sufferings.
Co-operative banks in India came into existence with the enactment of the
Agricultural Credit Co-operative Societies Act in 1904. Co-operative bank
form an integral part of banking system in India. Under the act of 1904, a
number of co-operative credit societies were started. Owing to the increasing
demand of co-operative credit, anew act was passed in 1912, which was
provided for establishment of co-operative central banks by a union of
primary credit societies and individuals.
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
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The chief functions of Co-operative banks are::
a. To attract deposit from non-agriculturist,
b. To use excess funds of some societies temporarily to make up for
shortage in another,
c. To supervise and guide affiliated societies.
The basic principles on which a Co-operative bank works are:
1. A co-operative character of activities and trait of mutual aid of credit
granted.
2. Catering for collective organizations and their members.
3. Restriction on the number of individual votes
As a result, during 2007-08, the Primary Cooperative Agriculture and Rural
Development Banks have again started lending for the Non-Farm Sector
including Jewel Loans
Aiming at high rates on deposits and low rates on lending.
Limitation of dividends out of profits and bonus to depositors
and borrowers or grants to cultural or co-operative endeavour.
These banks are constituted of voluntary association, self-help and mutual
aid, one share one vote and non-discrimination and equality of members.
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CHAPTER-3
ROLE OF CO-OPERATIVE BANKING
ROLE OF CO-OPERATIVE BANKING IN INDIA:
Co-operative Banks are much more important in India than anywhere else in
the world. The distinctive character of this bank is service at a lower cost and
service without exploitation. It has gained its importance by the role assigned
to them, the expectations they are supposed to fulfill, their number, and the
number of offices they operate. Co-operative banks role in rural financing
continues to be important day by day, and their business in the urban areas
also has increased phenomenally in recent years mainly due to the sharp
increase in the number of primary co-operative banks. In rural areas, as far
as the agricultural and related activities are concerned, the supply of credit
was inadequate, and money lenders would exploit the poor people in rural
areas providing them loans at higher rates. So, Co-operative banks mobilize
deposits and purvey agricultural and rural credit with a wider outreach and
provide institutional credit to the farmers. Co-operative bank have also been
an important instrument for various development schemes, particularly
subsidy-based programmes for poor
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The Co-operative banks in rural areas mainly finance agricultural based
activities like:
· Farming
· Cattle
· Milk
· Hatchery
· Personal finance
The Co-operative banks in urban areas finance in activities like:
· Self-employment
· Industries
· Small scale units
· Home finance
· Consumer finance
· Personal finance
Some of the forward looking Co-operative banks have developed sufficient
core competencies to such an extent that they are able to challenge state and
private sector banks.
The exponential growth of Co-operative banks is attributed mainly to their
much better contacts with the local people, personal interaction with
customers, and their ability to catch the nerve of the local clientele. The total
deposits and lendings of Co-operative banks are much more than the Old
Private Sector Banks and the New Private Sector Banks.
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IMPORTANCE OF CO-OPERATIVE BANKING
Co-operative bank forms an integral part of banking system in India. This
bank operates mainly for the benefit of rural area, particularly the
agricultural sector. Co-operative bank mobilize deposits and supply
agricultural and rural credit with the wider outreach. They are the main
source for the institutional credit to farmers. They are chiefly responsible for
breaking the monopoly of moneylenders in providing credit to agriculturists.
Co-operative bank has also been an important instrument for various
development schemes, particularly subsidy-based programmes for the poor.
Co-operative banks operate for non-agricultural sector also but their role is
small.
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CHAPTER-4
HISTORY OF CO-OPERATIVE BANKING
HISTORY OF CO-OPERATIVE BANKING
The origins of the cooperative banking movement in India can be traced to
the close of nineteenth century when, inspired by the success of the
experiments related to the cooperative movement in Britain and the
cooperative credit movement in Germany, such societies were set up in
India.
Now, Co-operative movement is quite well established in India. The first
legislation on co-operation was passed in 1904. In 1914 the Maclagen
committee envisaged a three tier structure for co-operative banking viz.
Primary Agricultural Credit Societies (PACs) at the grass root level, Central
Co-operative Banks at the district level and State Co-operative Banks at state
level or Apex Level.
The co-operative banks arrived in India in the beginning of 20th Century as
an official effort to create a new type of institution based on the principles of
co-operative organisation and management, suitable for problems peculiar to
Indian conditions. These banks were conceived as substitutes for money
lenders, to provide timely and adequate short-term and long-term
institutional credit at reasonable rates of interest.
The Anyonya Co-operative Bank in India is considered to have been the first
co-operative bank in Asia which was formed nearly 100 years back in
Baroda. It was established in 1889 with the name Anyonya Sahayakari
Mandali Co-operative Bank Limited, with a primary objective of
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providing an alternative to exploitation by moneylenders for Baroda's
residents.
In the formative stage Co-operative Banks were Urban Co-operative
Societies run on community basis and their lending activities were restricted
to meeting the credit requirements of their members. The concept of Urban
Co-operative Bank was first spelt out by Mehta Bhansali Committee in 1939
which defined on Urban Co-operative Bank . Provisions of Section 5 (CCV)
of Banking Regulation Act, 1949 (as applicable to Co-operative Societies)
defined an Urban Co-operative Bank as a Primary Co-operative Bank other
than a Primary Co-operative Society were made applicable in 1966.
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