These are another class of banks and are not considered as commercial banks as they have social objectives and profit is not the motive. Co-operative Banks are subject to CRR and SLR requirements as other banks. However, their requirements are less than commercial banks.
Examples: The Andhra Pradesh State Co-operative Bank Ltd., The Uttaranchal Rajya Sahakari Bank Ltd. etc.
Commercial bank vs Cooperative bank
- Commercial banks are governed by the Banking Regulation Act. Co-operative banks are governed by the Co-operative Societies Act of 1904. ‘.Commercial banks are subject to the control of the Reserve Bank of India directly. Co-operative banks are subject to the rules laid down by the Registrar of Co-operative Societies.
- Co-operative banks have lesser scope in offering a variety of banking services than commercial banks.
- Commercial banks in India are on a larger scale. They have adopted the system of branch banking, so they have countrywide operations. Co-operative banks are relatively on a much smaller scale. Many co-operative banks follow only unit-bank system, though there are cooperative banks with a number of branches but their coverage is not countrywide.
- Commercial banks mostly provide short-term finance to industry, trade and commerce, including priority sectors like exports, etc.
Cooperative Banks | Commercial Banks |
Cooperative Banks are co-operative societies governed by the co-operative societies Act, 1904. | Commercial banks are joint stock companies they are governed by the Banking Regulation Act, 1949. |
Cooperative Banks generally provide short, medium and long term finance to agriculture and allied sectors. | Commercial Banks generally provide short, medium and long term finance, to trade, commerce and industry. |
Cooperative Banks lend finance to their members only i.e., shareholders borrow from a co-operative bank. | Commercial Banks lend to anyone who is willing to borrow and satisfies the conditions of the bank. |
Cooperative Banks operate on a relatively small scale. | Their operations are on a large scale. |
Scope of activities of a co-operate bank is limited to providing different types of loans to their members. | Commercial banks offers a wide range of financial assistance and financial services. |
Cooperative banks operate as federal structure in India. | Commercial banks have the structure of a joint stock company. |
Co-operative Banks are subject to the supervision of the state governments, NABARD and the RBI. | Commercial Banks come directly under the supervision of the Reserve Bank of India. |
Regional Rural Banks (RRBs)
They were set up as government-sponsored, regional based rural lending institutions under the Regional Rural Banks Act, 1976. RRBs were configured as hybrid micro banking institutions, combining the local orientation and small scale lending culture of the cooperatives and the business culture of commercial banks.
Their mission was to fulfil the credit needs of the relatively unserved sections in the rural areas -small and marginal farmers, agricultural labourers and socio-economically weaker sections. Shareholding pattern of RRBs among the three sponsoring entities is 50:35:15 among central government, sponsoring bank and state government respectively.