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Setting Up Of Credit Co-Operative Bank

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About Setting Up Of Credit Co-Operative Bank

These are small sized units formed in the cooperative sector that function both in urban as well as non-urban centres. In our country, cooperative banks offer loan money to small borrowers in the industrial as well as trade sectors in addition to professional and salary classes. The cooperative banking structure in our country is broken into four categories i.e. primary co-operative credit society, state co-operative banks, central co-operative bank, and land development banks. Urban co-operative banks are further divided into weak and urban banks, on the basis of certain parameters of their individual performance. India had a total of 261 weak banks at the end of June in 2001.

Co-operative banks are controlled by the Reserve Bank of India and administered by the Banking Laws (Cooperative Societies) Act, 1965 as well as Banking Regulations Act, 1949. Rural cooperative banks are administered by the state registrar of cooperatives.

Urban cooperative banks have a changing (i.e decreasing). The capital requirement of Rs 4 crore as well as a membership of minimum 3,000 in a population of more than Rs 10 lakh is required. The figure of minimum membership keeps decreasing with a decrease in population and vice versa.

Urban cooperative banks are enforced to maintain a SLR equivalent to 25% of its total net demand and bank liabilities.

If in case, the bank fails to comply with the minimum share capital norms, it won’t be eligible for survival.

It was very easy to open a cooperative bank with a minimum capital of Rs 15 lakh. But no more so. The Reserve Bank had announced that the minimum capital requirements for cooperative banks would soon shoot up to as much as Rs 4 crore.

It is said that under the existing norms, a cooperative bank can easily be set up with a minimum capital of Rs 15 lakh, which will now be increased to Rs 50 lakh for the banks operating in the backward areas and Rs 3 crore for urban areas which are already having an appropriate banking infrastructure.

Regulatory Functions

Licensing of New Primary (Urban) Cooperative Banks

An (urban) cooperative bank, as in the condition of the commercial bank, is vital to get a license from the Reserve Bank of India, under the provisions of Section 22 of the Banking Regulation Act, 1949 (As Applicable to Cooperative Societies).

Licensing of Existing Primary (Urban) Co-operative Banks

The primary (urban) the various cooperative banks operational in the country from March 1, 1966, onwards (when some banking laws were applied to UCBs), were needed to apply to the Reserve Bank of India. They were given three months to acquire a license to carry on their banking business. On the other hand, the existing unlicensed primary (urban) cooperative banks can easily carry on with their banking business till they are refused a license by the Reserve Bank of India.

Branch Licensing

As per the provisions of Section 23 of the Banking Regulation Act, 1949 (As Applicable to Cooperative Societies), it is mandate for the main (urban) cooperative banks to obtain permission from the Reserve Bank of India for opening its branches.

Statutory Provision

All the regulatory functions of Urban Banks Department disclose the monitoring compliance in accordance with the provisions of the Banking Regulation Act, 1949 (As Applicable to Cooperative Societies) by urban cooperative banks

Minimum Share Capital

According to the provisions of the Banking Regulation Act, 1949 Section 11 (As Applicable to Cooperative Societies), none of the primary (urban) cooperative bank can begin or even carry on banking business if the real or exchangeable value of its paid-up capital as well as reserves is anytime less than lakh.

Laws Applicable on a Co-Operative Society

The Cooperative Societies Act, 1912 broadened the domain of cooperation amongst its members and implemented for administration by a central organization. Any cooperative society, that has its object as the promotion of the economic interests of its members in consonance with the co-operative principles might be enrolled with limited or unlimited liability by filing application to the registering authority with essential documents to be provided by them

A typical Co-operative Society has to administer itself as per the following bye-laws are:

  • Co-operative Societies Act under which the same is registered whether it be under state Act or Central Act.
  • Co-operative Societies rules made under the central as well as state rules
  • The various bye-laws, as approved by the registrar at the time of registration and amendments made in it from time to time which are also approved by the registrar, these bye-laws have to be formed by the concerned members themselves and present it to the registration authority for its approval.
  • Notification and Orders by the concerned Government


Frequently Asked Questions

A co-operative Society utilizes the funds by giving loans to the members and in case the surplus remains then they invest it as per the Co-operatives society Act / Rules / By-Laws. They give loans directly to people or business for small and medium purpose under different heads like Housing Loan, Gold Loan, Vehicle Loan, Personal Loan, Business Loan, Food Grain Loan, and Consumer Loan. EMI is fix by co-op society for members and full proof agreement on stem paper are done for loan.


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