Page 316 - DMGT207_MANAGEMENT_OF_FINANCES

Unit 14: Capital Market and Financial Institutions

Co-operative Banks Notes

People who come together to jointly serve their common interest often form a co-operative
society under the Co-operative Societies Act. When a co-operative society engages itself in
banking business it is called a Co-operative Bank. The society has to obtain a licence from the
Reserve Bank of India before starting banking business. Any co-operative bank as a society is to
function under the overall supervision of the Registrar, Co-operative Societies of the State.

Notes As regards banking business, the society must follow the guidelines set and issued
by the Reserve Bank of India.

Types of Co-operative Banks

There are three types of co-operative banks operating in our country. They are primary credit
societies, central co-operative banks and state co-operative banks. These banks are organized at
three levels, village or town level, district level and state level.
(i) Primary Credit Societies: These are formed at the village or town level with borrower and
non-borrower members residing in one locality. The operations of each society are
restricted to a small area so that the members know each other and are able to watch over
the activities of all members to prevent frauds.
(ii) Central Co-operative Banks: These banks operate at the district level having some of the
primary credit societies belonging to the same district as their members. These banks
provide loans to their members (i.e., primary credit societies) and function as a link
between the primary credit societies and state co-operative banks.
(iii) State Co-operative Banks: These are the apex (highest level) co-operative banks in all the
states of the country. They mobilise funds and help in its proper channelisation among
various sectors. The money reaches the individual borrowers from the state co-operative
banks through the central co-operative banks and the primary credit societies.

Task Give two examples of the following banks:

1. Public sector banks 2. Private bank 3. Regional Rural bank
4. Foreign bank 5. State Cooperative bank

Specialized Banks

There are some banks, which cater to the requirements and provide overall support for setting
up business in specific areas of activity. EXIM Bank, SIDBI and NABARD are examples of such
banks. They engage themselves in some specific area or activity and thus, are called specialised
banks. Let us know about them.
(i) Export Import Bank of India (EXIM Bank): If you want to set up a business for exporting
products abroad or importing products from foreign countries for sale in our country,
EXIM bank can provide you the required support and assistance. The bank grants loans to
exporters and importers and also provides information about the international market. It
gives guidance about the opportunities for export or import, the risks involved in it and
the competition to be faced, etc.

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