2.1.2.3. Rural Cooperative Banks

Short term structures – They lend up to one year. They lend for cultivation activities and provide working capital to buy seeds, fertilisers etc. The short term structures have a three tier set up:

♤ State cooperative banks (SCB) – Each state has its own SCB. It is the apex body for cooperative banks in a particular state. They act as intermediary between RBI and NABARD on one side and District or central cooperative banks and Primary agricultural credit societies on the other.

o They get loan from RBI at concessional rate

o It gives grants to cooperative banks in the state

Now the intermediation of these banks is abolished by a memorandum of understanding between RBI and these banks. Now, RBI has direct dealing with low tier banks.

♤ District or central cooperative banks - It operates at district level. There are two types of central or district cooperative banks:

o Cooperative banking union – Its membership is open to only cooperative societies

o Mixed central cooperative bank - Its membership is open to both cooperative societies and individuals.

They get loan from SCBs and they grant loans to PACs and individuals

♤ Primary agricultural credit societies (PACs) – It operates at village level. It gives loans to its members as individuals.

Long term structures – They lend for medium term and long term which ranges from 1.5 to 25 years. They lend for land development, purchase of agricultural equipments, redemption of old debts etc. They initially were called as mortgage banks, then land development banks and now they are called as Cooperative Agricultural and Rural Development Banks (CARDBs). It is a two tiered structure:

♤ State CARDBs

♤ Primary CARDBs