What is the role of a co-operative bank in India?

As the name suggests, co-operative societies are groups working based on the principles of co-operation, joint ownership, mutual help, and democratic decision making.

Banks formed by these societies, popularly known as co-operative banks, are thus, small financial entities created for banking purposes by persons belonging to a locality, or professional community, or even by those who share common interests.

Operating both in urban and rural centres in our country, co-operative banks provide banking services like savings and loans to members as well as non-members.

Although they are smaller than commercial banks, co-operative banks have been successful in financing areas under agriculture, personal finance, self employment, small scale industries etc.

The banking system has a three-tier set up. The state co-operative bank is at the apex level, the district co-operative bank is at the district level, and primary co-operative societies are at the rural level.

Compared to others, these banks provide a little higher rate of interest on deposits. They mainly work on the principle of ‘no profit, no loss’. Anyonya Sahakari Mandali, established in 1889 in the province of Baroda, is known to be the earliest known cooperative credit union in our country. They played a significant role in our economy.