2.1.2. Cooperative Banks

Cooperative bank is an institution established on the basis of cooperative principles and dealing in ordinary banking business. They are called cooperative banks as these have cooperation of stakeholders as motive. Some points to be noted about cooperative banks are:

♤ They are established by state laws - registered under the Cooperative Societies Act, 1912.

♤ These are regulated by the Reserve Bank of India under the Banking Regulation Act, 1949 and Banking Laws (Application to Co-operative Societies) Act, 1965.

♤ If some individuals come together, they can establish a cooperative bank.

♤ They are established with the aim of funding agriculture and allied sectors and to finance village and cottage industries.

♤ They lend as well as accept deposits.

♤ They operate on the principle of ‘one person one vote’ in decision making.

♤ Unlike commercial banks, who are driven by profit, co-operative banks work on a “no profit, no loss” basis.

♤ NABARD is the apex body for cooperative sector in India.

NABARD

The National Bank for Agriculture and Rural Development (NABARD) was set up as an apex Development Bank with a mandate of facilitating credit flow for the promotion and development of agriculture, small-scale industries, cottage and village industries, handicrafts and other rural crafts.

NABARD also acts as a co-ordinator in the operations of rural credit institutions, assists the government, the Reserve Bank of India and other organisations in matters pertaining to rural development, offers training and research facilities to banks, co-operatives, and organisations working in the realm of rural development and helps the state governments in achieving their targets of providing assistance to institutions in agriculture and rural development.

NABARD also acts as a regulator for co-operative banks and Regional Rural Banks (RRBs). One of the most important role of NABARD is capacity building of partner agencies and development institutions. NABARD provide facilities for training, for dissemination of information and the promotion of research including the undertaking of studies, researches, techno-economic and other surveys in the field of rural banking, agriculture and rural development. It provides technical, legal, financial, marketing and administrative assistance to any person engaged in agriculture and rural development activities. Thus historically, NABARD has played an important role in alleviation of poverty in the rural areas of the country and continues to do so.