Cooperative Banks

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COOPERATIVE BANKS

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 microbanking 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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Definition
“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.

History of Cooperative 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 cooperation 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. 2   

In the beginning of 20th century, availability of credit in India, more particularly in rural areas, was almost absent. Agricultural and related activities were starved of organised, institutional credit. The rural folk had to depend entirely on the money lenders, who lent often at usurious rates of interest. 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 providing an alternative to exploitation...
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