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8/13/2019 comparative between commercial bank and co operative bank
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COMPARATIVE STUDY BETWEEN COMMERCIAL BANK AND CO-OPERATIVE BANK
S.I.E.S COLLEGE OF COMMERCE AND ECONOMICS, SION 1
Banking regulation Act of India, 1949 dines banking as accepting from the purpose of
lending or investment of deposit of money from the public, repayable on demand or their wish
and withdrawable by cheques, drafts, and order or otherwise.Banking in India originated in the
last decades of the 18th century. The first banks were The General Bank of India, which started
in 1786, andBank of Hindustan,which started in 1790; both are now defunct. The oldest bank in
existence in India is theState Bank of India,which originated in theBank of Calcutta in June
1806.
The banks, which perform all kinds of banking business and generally finance trade and
commerce, are called commercial banks. Since their deposits are for a short period, these banks
normally advance short-term loans to the businessmen and traders and avoid medium-term and
long-term lending. These institutions are run to make a profit and owned by a group of
individuals, yet some may be members of the Federal Reserve System. The commercial bank
also provide secured and unsecured loan.
A co-operative bank is a financial entity which belongs to its members, who are at the
same time the owners and the customers of their bank. Co-operative banks are often created by
persons belonging to the same local or professional community or sharing a common interest.
Co-operative banks generally provide their members with a wide range of banking and financial
services (loans, deposits, banking accounts etc.). Co-operative banks differ from stockholder
banks by their organization, their goals, their values and their governance.
The structure of commercial banking is of branch-banking type; while the co-operative
banking structure is a three tier federal one.
- A State Co-operative Bank works at the apex level (ie. works at state level).
- The Central Co-operative Bank works at the Intermediate Level.
(ie. District Co-operative Banks ltd. works at district level)
- Primary co-operative credit societies at base level (At village level)
The main objective of a Commercial Bank is to accept deposits from public for the
purpose of lending to industry and commerce. Main objective of co-operative bank is to accept
http://en.wikipedia.org/w/index.php?title=Bank_of_Hindustan&action=edit&redlink=1http://en.wikipedia.org/wiki/State_Bank_of_Indiahttp://en.wikipedia.org/wiki/Bank_of_Calcuttahttp://en.wikipedia.org/wiki/Bank_of_Calcuttahttp://en.wikipedia.org/wiki/State_Bank_of_Indiahttp://en.wikipedia.org/w/index.php?title=Bank_of_Hindustan&action=edit&redlink=18/13/2019 comparative between commercial bank and co operative bank
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COMPARATIVE STUDY BETWEEN COMMERCIAL BANK AND CO-OPERATIVE BANK
S.I.E.S COLLEGE OF COMMERCE AND ECONOMICS, SION 2
deposits from the members and the public for the purpose of providing loans to farmers and
small businessmen with a motto of service.
At present 20 Commercial Banks have been nationalized in India. In India Co-operative
Banks are not nationalized.
The Commercial Banks provide a lesser rate of interest as compared to co-operative
banks. The Co-operative Banks provide a little higher rate of interest on deposits as compared to
commercial banks. Commercial banks are safer than co-operative banks.
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COMPARATIVE STUDY BETWEEN COMMERCIAL BANK AND CO-OPERATIVE BANK
S.I.E.S COLLEGE OF COMMERCE AND ECONOMICS, SION 3
PURPOSE OF THE STUDY:-
The basic purpose behind the study was to get detailed knowledge about the
Commercial bank and Co-operative bank. The study was basically aimed to know
more about the differences between Commercial banks and Co-operative banks.
OBJECTIVES OF THE STUDY:-
To study about Banks.To study about Commercial banks.To study about Co-operative banks.To study about difference between Commercial banks and Co-operative
banks.
To study about functions of commercial bank.To study about classification of co-operative bank.
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COMPARATIVE STUDY BETWEEN COMMERCIAL BANK AND CO-OPERATIVE BANK
S.I.E.S COLLEGE OF COMMERCE AND ECONOMICS, SION 4
RESEARCH METHODOLOGY:-
LIMITATIONS:-
Primary data is not collected.Find very difficult to collect information on distinguish between commercial
bank and co-operative bank.
SECONDARY
DATA
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COMPARATIVE STUDY BETWEEN COMMERCIAL BANK AND CO-OPERATIVE BANK
S.I.E.S COLLEGE OF COMMERCE AND ECONOMICS, SION 5
1.1 INTRODUCTION OF BANKS
The term bank is derived from the French word Banco which means a Bench or Money
exchange table. In olden days, European money lenders or money changers used to display
(show) coins of different countries in big heaps (quantity) on benches or tables for the purpose of
lending or exchanging.
A bank is a financial institution which deals with
deposits and advances and other related services. It
receives money from those who want to save in the
form of deposits and it lends money to those who need
it. Banking is defined as the accepting for the purpose
of lending or investment of deposits, money from the
public, repayable on demand and with drawable by
cheques, drafts, and orders or otherwise.
Finance is the life blood of trade, commerce and industry. Now-a-days, banking sector acts
as the backbone of modern business. Development of any country mainly depends upon the
banking system.
DEFINITION OF BANKS
Banking regulation Act of India, 1949 dines banking as accepting from the purpose of
lending or investment of deposit of money from the public, repayable on demand or their wish
and withdrawableby cheques, drafts, and order or otherwise.
1.2 HISTORY
Banking in India originated in the last decades of the
18th century. The first banks were The General Bank of India,
which started in 1786, and Bank of Hindustan,which started
in 1790; both are now defunct. The oldest bank in existence in
India is theState Bank of India,which originated in theBank
of Calcutta in June 1806, which almost immediately became
http://en.wikipedia.org/w/index.php?title=Bank_of_Hindustan&action=edit&redlink=1http://en.wikipedia.org/wiki/State_Bank_of_Indiahttp://en.wikipedia.org/wiki/Bank_of_Calcuttahttp://en.wikipedia.org/wiki/Bank_of_Calcuttahttp://en.wikipedia.org/wiki/Bank_of_Calcuttahttp://en.wikipedia.org/wiki/Bank_of_Calcuttahttp://en.wikipedia.org/wiki/State_Bank_of_Indiahttp://en.wikipedia.org/w/index.php?title=Bank_of_Hindustan&action=edit&redlink=18/13/2019 comparative between commercial bank and co operative bank
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COMPARATIVE STUDY BETWEEN COMMERCIAL BANK AND CO-OPERATIVE BANK
S.I.E.S COLLEGE OF COMMERCE AND ECONOMICS, SION 6
theBank of Bengal.This was one of the three presidency banks, the other two being theBank of
Bombay and the Bank of Madras,all three of which were established under charters from the
British East India Company. For many years the Presidency banks acted as quasi-central banks,
as did their successors. The three banks merged in 1921 to form the Imperial Bank of India,
which, upon India's independence, became theState Bank of India in 1955.
The first entirely Indian joint stock bank was the Oudh Commercial Bank, established
in 1881 in Faizabad. It failed in 1958. The next was the Punjab National Bank,established in
Lahore in 1895, which has survived to the present and is now one of the largest banks in India.
Around the turn of the 20th Century, the Indian economy was passing through a relative
period of stability. Around five decades had elapsed since the Indian Mutiny, and the social,
industrial and other infrastructure had improved. Indians had established small banks, most of
which served particular ethnic and religious communities.
1.3 CHARACTERISTICS / FEATURES OF A BANK
1. Dealing in Money: Bank is a financial institution which deals with other people'smoney i.e. money given by depositors.
http://en.wikipedia.org/wiki/Bank_of_Bengalhttp://en.wikipedia.org/wiki/Bank_of_Bombayhttp://en.wikipedia.org/wiki/Bank_of_Bombayhttp://en.wikipedia.org/wiki/Bank_of_Madrashttp://en.wikipedia.org/wiki/Imperial_Bank_of_Indiahttp://en.wikipedia.org/wiki/State_Bank_of_Indiahttp://en.wikipedia.org/wiki/Faizabadhttp://en.wikipedia.org/wiki/Punjab_National_Bankhttp://en.wikipedia.org/wiki/Lahorehttp://en.wikipedia.org/wiki/Indian_rebellion_of_1857http://en.wikipedia.org/wiki/Indian_rebellion_of_1857http://en.wikipedia.org/wiki/Lahorehttp://en.wikipedia.org/wiki/Punjab_National_Bankhttp://en.wikipedia.org/wiki/Faizabadhttp://en.wikipedia.org/wiki/State_Bank_of_Indiahttp://en.wikipedia.org/wiki/Imperial_Bank_of_Indiahttp://en.wikipedia.org/wiki/Bank_of_Madrashttp://en.wikipedia.org/wiki/Bank_of_Bombayhttp://en.wikipedia.org/wiki/Bank_of_Bombayhttp://en.wikipedia.org/wiki/Bank_of_Bengal8/13/2019 comparative between commercial bank and co operative bank
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COMPARATIVE STUDY BETWEEN COMMERCIAL BANK AND CO-OPERATIVE BANK
S.I.E.S COLLEGE OF COMMERCE AND ECONOMICS, SION 7
2. Individual / Firm / Company: A bank may be a person, firm or a company. Abanking company means a company which is in the business of banking.
3.
Acceptance of Deposit: A bank accepts money from the people in the form ofdeposits which are usually repayable on demand or after the expiry of a fixed period. It
gives safety to the deposits of its customers. It also acts as a custodian of funds of its
customers.
4. Giving Advances: A bank lends out money in the form of loans to those who requireit for different purposes.
5. Payment and Withdrawal: A bank provides easy payment and withdrawal facilityto its customers in the form of cheques and drafts, It also brings bank money in
circulation. This money is in the form of cheques, drafts, etc.
6. Agency and Utility Services: A bank provides various banking facilities to itscustomers. They include general utility services and agency services.
7. Profit and Service Orientation: A bank is a profit seeking institution havingservice oriented approach.
8. Ever increasing Functions: Banking is an evolutionary concept. There iscontinuous expansion and diversification as regards the functions, services and activities
of a bank.
9. Connecting Link: A bank acts as a connecting link between borrowers and lendersof money. Banks collect money from those who have surplus money and give the same to
those who are in need of money.
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COMPARATIVE STUDY BETWEEN COMMERCIAL BANK AND CO-OPERATIVE BANK
S.I.E.S COLLEGE OF COMMERCE AND ECONOMICS, SION 8
10.Banking Business: A bank's main activity should be to do business of bankingwhich should not be subsidiary to any other business.
11.Name Identity: A bank should always add the word "bank" to its name to enable
people to know that it is a bank and that it is dealing in money.
1.4 TYPES OF BANKS
1. Saving Banks:-Saving banks are established to create saving habit among the people. These
banks are helpful for salaried people and low income groups. The deposits collected from
customers are invested in bonds, securities, etc. At present most of the commercial banks
carry the functions of savings banks. Postal department also performs the functions of
saving bank.
2. Commercial Banks:-Commercial banks are established with an objective to help businessmen. These
banks collect money from general public and give short-term loans to businessmen by
way of cash credits, overdrafts, etc. Commercial banks provide various services like
collecting cheques, bill of exchange, remittance money from one place to another place.
http://kalyan-city.blogspot.com/2010/09/commercial-banks-definitions-primary.htmlhttp://kalyan-city.blogspot.com/2010/09/commercial-banks-definitions-primary.html8/13/2019 comparative between commercial bank and co operative bank
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COMPARATIVE STUDY BETWEEN COMMERCIAL BANK AND CO-OPERATIVE BANK
S.I.E.S COLLEGE OF COMMERCE AND ECONOMICS, SION 9
In India, commercial banks are established under Companies Act, 1956. In 1969, 14
commercial banks were nationalised by Government of India. The policies regarding
deposits, loans, rate of interest, etc. of these banks are controlled by the Central Bank.
3. Industrial Banks / Development Banks:-Industrial / Development banks collect cash by issuing shares & debentures and
providing long-term loans to industries. The main objective of these banks is to provide
long-term loans for expansion and modernisation of industries. In India such banks are
established on a large scale after independence. They are Industrial Finance Corporation
of India (IFCI), Industrial Credit and Investment Corporation of India (ICICI) and
Industrial Development Bank of India (IDBI).
4. Land Mortgage / Land Development Banks:-Land Mortgage or Land Development banks are also known as Agricultural
Banks because these are formed to finance agricultural sector. They also help in land
development. In India, Government has come forward to assist these banks. The
Government has guaranteed the debentures issued by such banks. There is a great risk
involved in the financing of agriculture and generally commercial banks do not take
much interest in financing agricultural sector.
5. Indigenous Banks:-Indigenous banks means Money Lenders and Sahukars. They collect deposits
from general public and grant loans to the needy persons out of their own funds as well as
from deposits. These indigenous banks are popular in villages and small towns. They
perform combined functions of trading and banking activities. Certain well-known indian
communities like Marwaries and Multani even today run specialised indigenous banks.
6. Central / Federal / National Bank:-Every country of the world has a central bank. In India, Reserve Bank of India, in
U.S.A, Federal Reserve and in U.K, Bank of England. These central banks are the
http://kalyan-city.blogspot.com/2010/09/nationalisation-of-banks-in-india.htmlhttp://www.ifciltd.com/http://www.icicibank.com/http://www.idbi.com/http://www.federalreserve.gov/http://www.bankofengland.co.uk/http://www.bankofengland.co.uk/http://www.federalreserve.gov/http://www.idbi.com/http://www.icicibank.com/http://www.ifciltd.com/http://kalyan-city.blogspot.com/2010/09/nationalisation-of-banks-in-india.html8/13/2019 comparative between commercial bank and co operative bank
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COMPARATIVE STUDY BETWEEN COMMERCIAL BANK AND CO-OPERATIVE BANK
S.I.E.S COLLEGE OF COMMERCE AND ECONOMICS, SION 10
bankers of the other banks. They provide specialised functions i.e. issue of paper
currency, working as bankers of government, supervising and controlling foreign
exchange. A central bank is a non-profit making institution. It does not deal with the
public but it deals with other banks. The principal responsibility of Central Bank is
thorough control on currency of a country.
7. Co-operative Banks:-In India, Co-operative banks are registered under the Co-operative Societies Act,
1912. They generally give credit facilities to small farmers, salaried employees, small-
scale industries, etc. Co-operative Banks are available in rural as well as in urban areas.
The functions of these banks are just similar to commercial banks.
8. Exchange Banks:-Hong Kong Bank, Bank of Tokyo, Bank of America are the examples of Foreign
Banks working in India. These banks are mainly concerned with financing foreign trade.
Following are the various functions of Exchange Banks:-
Remitting money from one country to another country, Discounting of foreign bills, Buying and Selling Gold and Silver, and Helping Import and Export Trade.
9. Consumers Banks:-Consumers bank is a new addition to the existing type of banks. Such banks are
usually found only in advanced countries like U.S.A. and Germany. The main objective
of this bank is to give loans to consumers for purchase of the durables like Motor car,
television set, washing machine, furniture, etc. The consumers have to repay the loans ineasy installments.
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COMPARATIVE STUDY BETWEEN COMMERCIAL BANK AND CO-OPERATIVE BANK
S.I.E.S COLLEGE OF COMMERCE AND ECONOMICS, SION 11
2.1 INTRODUCTION
The banks, which perform all kinds of banking
business and generally finance trade and commerce, are
called commercial banks. Since their deposits are for a
short period, these banks normally advance short-term
loans to the businessmen and traders and avoid
medium-term and long-term lending.
However, recently, the commercial banks have
also extended their areas of operation to medium-term
and long-term finance. Majority of the commercial
banks are in the public sector. However, there are
certain private sector banks operating as joint stock companies. Hence, the commercial banks are
also called joint stock banks.
DEFINITION:
An institution which accepts deposits, makes business
loans, and offers related services. Commercial banks also allow for
a variety of deposit accounts, such as checking, savings, and time
deposit.These institutions are run to make a profit and owned by
a group of individuals, yet some may be members of the Federal
Reserve System. While commercial banks offer services to
individuals, they are primarily concerned with receiving deposits
and lending to businesses.
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COMPARATIVE STUDY BETWEEN COMMERCIAL BANK AND CO-OPERATIVE BANK
S.I.E.S COLLEGE OF COMMERCE AND ECONOMICS, SION 12
2.2 HISTORY
The name bank derives from the Italian word banco "desk/bench", used during the
Renaissance era by Florentine bankers, who used to make their transactions above a desk
covered by a green tablecloth. However, traces of banking activity can be found even in ancient
times. In fact, the word traces its origins back to the
Ancient Roman Empire, where moneylenders would
set up their stalls in the middle of enclosed
courtyards called macella on a long bench called a
bancu, from which the words banco and bank are
derived. As a moneychanger, the merchant at the
bancu did not so much invest money as merely
convert the foreign currency into the only legal
tender in Romethat of the Imperial Mint.
The role of commercial banks:
Commercial banks engage in the following activities:
processing of payments by way of telegraphic transfer, EFTPOS, internet banking, orother means
issuing bank drafts and bank cheques accepting money on term deposit lending money by overdraft, installment loan, or other means providing documentary and standby letter of credit, guarantees, performance bonds,
securities underwriting commitments and other forms of off balance sheet exposures
safekeeping of documents and other items in safe deposit boxes sales, distribution or brokerage, with or without advice, of: insurance, unit trusts and
similar financial products as a financial supermarket cash management and treasury merchant banking andprivate equity financing traditionally, large commercial banks also underwrite bonds, and make markets in
currency, interest rates, and credit-related securities, but today large commercial banks
usually have aninvestment bank arm that is involved in the mentioned activities.
http://en.wikipedia.org/wiki/Italian_languagehttp://en.wikipedia.org/wiki/Renaissancehttp://en.wikipedia.org/wiki/Florencehttp://en.wikipedia.org/wiki/Letters_of_credithttp://en.wikipedia.org/wiki/Merchant_bankhttp://en.wikipedia.org/wiki/Private_equityhttp://en.wikipedia.org/wiki/Market_makerhttp://en.wikipedia.org/wiki/Investment_bankhttp://en.wikipedia.org/wiki/Investment_bankhttp://en.wikipedia.org/wiki/Market_makerhttp://en.wikipedia.org/wiki/Private_equityhttp://en.wikipedia.org/wiki/Merchant_bankhttp://en.wikipedia.org/wiki/Letters_of_credithttp://en.wikipedia.org/wiki/Florencehttp://en.wikipedia.org/wiki/Renaissancehttp://en.wikipedia.org/wiki/Italian_language8/13/2019 comparative between commercial bank and co operative bank
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COMPARATIVE STUDY BETWEEN COMMERCIAL BANK AND CO-OPERATIVE BANK
S.I.E.S COLLEGE OF COMMERCE AND ECONOMICS, SION 13
2.3 TYPES OF LOANS GRANTED BY COMMERCIAL BANKS
The commercial banks also provide various types of loans. Some of the loans provided
bank are as follows:
1.Secured loan:-A secured loan is a loan in which the
borrower pledges some asset (e.g. a car or property)
as collateral for the loan, which then becomes a
secured debt owed to the creditor who gives the
loan. The debt is thus secured against the
collateral in the event that the borrower defaults, the
creditor takes possession of the asset used as collateral and may sell it to regain some or
all of the amount originally lent to the borrower, for example, foreclosure of a home.
From the creditor's perspective this is a category of debt in which a lender has been
granted a portion of the bundle of rights to specified property. If the sale of the collateral
does not raise enough money to pay off the debt, the creditor can often obtain a
deficiency judgment against the borrower for the remaining amount. The opposite of
secured debt/loan is unsecured debt, which is not connected to any specific piece of
property and instead the creditor may only satisfy the debt against the borrower rather
than the borrower's collateral and the borrower.
2.Unsecured loan:-Unsecured Loans are monetary loans that are not secured against the borrower's
assets (i.e., nocollateral is involved). These may be available from financial institutions
under many different guises or marketing packages:
Bankoverdrafts Corporate bonds Credit card debt Credit facilities or lines of credit Personal loans
http://en.wikipedia.org/wiki/Secured_loanhttp://en.wikipedia.org/wiki/Collateral_(finance)http://en.wikipedia.org/wiki/Collateral_(finance)http://en.wikipedia.org/wiki/Overdrafthttp://en.wikipedia.org/wiki/Corporate_bondhttp://en.wikipedia.org/wiki/Credit_cardhttp://en.wikipedia.org/wiki/Personal_loanshttp://en.wikipedia.org/wiki/Personal_loanshttp://en.wikipedia.org/wiki/Credit_cardhttp://en.wikipedia.org/wiki/Corporate_bondhttp://en.wikipedia.org/wiki/Overdrafthttp://en.wikipedia.org/wiki/Collateral_(finance)http://en.wikipedia.org/wiki/Collateral_(finance)http://en.wikipedia.org/wiki/Secured_loan8/13/2019 comparative between commercial bank and co operative bank
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COMPARATIVE STUDY BETWEEN COMMERCIAL BANK AND CO-OPERATIVE BANK
S.I.E.S COLLEGE OF COMMERCE AND ECONOMICS, SION 14
2.4 SCHEDULED COMMERCIAL BANKS IN INDIA
The commercial banking structure in India consists of:
Scheduled Commercial Banks in India Unscheduled Banks in IndiaScheduled Banks in India constitute those banks
which have been included in the Second Schedule of
Reserve Bank of India(RBI) Act, 1934. RBI in turn
includes only those banks in this schedule which
satisfy the criteria laid down vide section 42 (6) (a)
of the Act.
As on 30th June, 1999, there were 300
scheduled banks in India having a total network of 64,918 branches.The scheduled commercial
banks in India comprise of State bank of India and its associates (8), nationalised banks (19),
foreign banks (45), private sector banks (32), co-operative banks and regional rural banks.
"Scheduled banks in India" means the State Bank of India constituted under the State
Bank of India Act, 1955 (23 of 1955), a subsidiary bank as defined in the State Bank of India
(Subsidiary Banks) Act, 1959 (38 of 1959), a corresponding new bank constituted under section
3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970),
or under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act,
1980 (40 of 1980), or any other bank being a bank included in the Second Schedule to the
Reserve Bank of India Act, 1934 (2 of 1934), but does not include a co-operative bank".
"Non-scheduled bank in India" means a banking company as defined in clause (c) of
section 5 of the Banking Regulation Act, 1949 (10 of 1949), which is not a scheduled bank .
The following are the Scheduled Banks in India (Public Sector): State Bank of India State Bank of Bikaner and Jaipur State Bank of Hyderabad State Bank of Indore State Bank of Mysore
State Bank of Saurashtra State Bank of Travancore Andhra Bank Allahabad Bank Bank of Baroda
http://finance.indiamart.com/investment_in_india/state_bank_india.htmlhttp://finance.indiamart.com/investment_in_india/state_bank_bikaner_and_jaipur.htmlhttp://finance.indiamart.com/investment_in_india/state_bank_of_hyderabad.htmlhttp://finance.indiamart.com/investment_in_india/state_bank_of_indore.htmlhttp://finance.indiamart.com/investment_in_india/state_bank_of_mysore.htmlhttp://finance.indiamart.com/investment_in_india/state_bank_of_saurastra.htmlhttp://finance.indiamart.com/investment_in_india/state_bank_of_travancore.htmlhttp://finance.indiamart.com/investment_in_india/andhra_bank.htmlhttp://finance.indiamart.com/investment_in_india/allahabad_bank.htmlhttp://finance.indiamart.com/investment_in_india/bank_of_baroda.htmlhttp://finance.indiamart.com/investment_in_india/bank_of_baroda.htmlhttp://finance.indiamart.com/investment_in_india/allahabad_bank.htmlhttp://finance.indiamart.com/investment_in_india/andhra_bank.htmlhttp://finance.indiamart.com/investment_in_india/state_bank_of_travancore.htmlhttp://finance.indiamart.com/investment_in_india/state_bank_of_saurastra.htmlhttp://finance.indiamart.com/investment_in_india/state_bank_of_mysore.htmlhttp://finance.indiamart.com/investment_in_india/state_bank_of_indore.htmlhttp://finance.indiamart.com/investment_in_india/state_bank_of_hyderabad.htmlhttp://finance.indiamart.com/investment_in_india/state_bank_bikaner_and_jaipur.htmlhttp://finance.indiamart.com/investment_in_india/state_bank_india.html8/13/2019 comparative between commercial bank and co operative bank
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COMPARATIVE STUDY BETWEEN COMMERCIAL BANK AND CO-OPERATIVE BANK
S.I.E.S COLLEGE OF COMMERCE AND ECONOMICS, SION 15
Bank of India Bank of Maharashtra Canara Bank Central Bank of India Corporation Bank Dena Bank Indian Overseas Bank Indian Bank
Oriental Bank of Commerce Punjab National Bank Punjab and Sind Bank Syndicate Bank Union Bank of India United Bank of India UCO Bank Vijaya Bank
The following are the Scheduled Banks in India (Private Sector):
ING Vysya Bank Ltd Axis Bank Ltd Indusind Bank Ltd ICICI Bank Ltd South Indian Bank
HDFC Bank Ltd Centurion Bank Ltd Bank of Punjab Ltd IDBI Bank Ltd Jammu & Kashmir Bank Ltd.
The following are the Scheduled Foreign Banks in India:
American Express Bank Ltd. ANZ Gridlays Bank Plc. Bank of America NT & SA Bank of Tokyo Ltd. Banquc Nationale de Paris Barclays Bank Plc Citi Bank N.C.
Deutsche Bank A.G. Hongkong and Shanghai Banking
Corporation
Standard Chartered Bank. The Chase Manhattan Bank Ltd. Dresdner Bank AG.
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COMPARATIVE STUDY BETWEEN COMMERCIAL BANK AND CO-OPERATIVE BANK
S.I.E.S COLLEGE OF COMMERCE AND ECONOMICS, SION 16
2.5 FUNCTIONS OF COMMERCIAL BANKS
Functions of commercial banks
Primary functions secondary functions
Invest ment Dealing in foreign
Function exchange
Credit creation
1. Fixed 1. Safty locker facilityDeposits 2. Transfer of2. Recurring 1. Savings moneyDeposits Bank 3. Travellers cheques
3. Cash 2. Current 1. Collection of cheques, 4. Letter of creditCertificates Account dividends etc. 5. Acting as referees4. Others operations 2. Payment of Rents, 6. Trade information
Insurance premiums etc. 7. ATM facility3. Purchase & sales of 8. Credit cards
Securities 9. Underwriting
1. Over draft 4. Acts as trustees, 10. Gift cheques2. Cash Credit executers etc. 11. Advice of3. Discounting of Bills 5. Acts as correspondent financial matter4. Loans and Advances 6. Preparation of Income 12. Others
5. Other advances Tax returns etc.7.Others
1) Accepting Deposits:The most significant and traditional function of commercial bank is accepting
deposit from the public. In case of current deposits, no interest is paid by the bank but the
depositor can withdraw his money anytime he likes without notice. Savings deposits are
paid a small rate of interest and the bank imposes certain restrictions on the withdrawal of
money. Fixed deposits are made by the persons who have idle money with them. They
can withdraw their money only after the expiry of the fixed period of time. These
Acceptance of Deposits
Advancing of Loans
A enc Services
General Utility ServicesTime Deposits Demand
Deposits
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COMPARATIVE STUDY BETWEEN COMMERCIAL BANK AND CO-OPERATIVE BANK
S.I.E.S COLLEGE OF COMMERCE AND ECONOMICS, SION 17
deposits carry the highest rate of interest that depends on the period for which the money
is deposited.
2) Providing Loans:Banks provide loans against approved securities to the public and companies.
Loans can be granted in the form of cash credit, short term loan, overdraft, discounting of
bills and demand loans. Under cash credit system, borrower is sanctioned a credit limit up
to which he can borrow from the bank. The interest is calculated on the amount actually
withdrawn. Short term loans are given as personal loans against some security. The
interest is payable on the entire sum of loan granted. In case of Overdraft, a person is
allowed to overdraw his current account to a certain limit as specified by the bank.
The interest is paid on the amount outstanding against his balance and not on the amount
of loan sanctioned. A bill of exchange is drawn by a creditor on the debtor specifying the
amount of debt and the date on which it is payable. Before the maturity of the bill, a
debtor can get it discounted from the bank paying a very small interest.
3) Credit Creation:A bank can be called the factory or the manufacturer of the credit. In the process
of accepting and depositing money, banks multiply credit in the economy. It depends on
cash reserve ratio.
4) Transfer of funds:Commercial banks can transfer funds of a customer to other customer's accounts
in the same or the different bank through cheques, drafts, mail transfers, telegraphic
transfers etc.
5) Agency Functions: Collection of bills, drafts etc. Collection of interest, dividends etc. on the behalf of the customers.
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COMPARATIVE STUDY BETWEEN COMMERCIAL BANK AND CO-OPERATIVE BANK
S.I.E.S COLLEGE OF COMMERCE AND ECONOMICS, SION 18
Payment of interests, installment of loans, insurance premium etc.Purchase andsale of securities.
Banks also executes the will of their customers after their deaths.
6) Other Functions:i) Payment of credit letters and travelers cheques, gift cheques, bank draft etc.
ii) Banks also provide locker services for the valuable securities of their customers and
charge a very nominal fee.
iii) Banks also deals in foreign exchange. Such banks are usually called foreign exchange
banks.
There are various other functions that the bank performs but they cannot be cited
here as some of the functions differ from bank to bank. For example, some banks provide
the facility of credit cards and online banking whereas many other do not. These are some
of the modern functions of the bank. Commercial banks are the backbone of any
economy, be it India or America. Industries and agriculture flourish due to these banks.
These banks mobilize the savings of people that results in capital formation.
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COMPARATIVE STUDY BETWEEN COMMERCIAL BANK AND CO-OPERATIVE BANK
S.I.E.S COLLEGE OF COMMERCE AND ECONOMICS, SION 19
3.1 INTRODUCTION
A co-operative bank is a financial entity which belongs to its members, who are at the
same time the owners and the customers of their bank. Co-operative banks are often created by
persons belonging to the same local or professional community or sharing a common interest.
Co-operative banks generally provide their members
with a wide range of banking and financial services
(loans, deposits, banking accounts etc.). Co-operative
banks differ from stockholder banks by their
organization, their goals, their values and their
governance.
Co-operative banking is retail and commercial
banking organized on a co-operative basis. Co-
operative banking institutions take deposits and lend
money in most parts of the world. Co-operative banking, includes retail banking, as carried out
by credit unions, mutual savings and loan associations, building societies and co-operatives, as
well as commercial banking services provided by manual organizations (such as co-operative
federations) to co-operative businesses.
The structure of commercial banking is of branch-banking type; while the co-operative banking
structure is a three tier federal one.
- A State Co-operative Bank works at the apex level (ie. works at state level).
- The Central Co-operative Bank works at the Intermediate Level.
(ie. District Co-operative Banks ltd. works at district level)
- Primary co-operative credit societies at base level (At village level)
DEFINiTION:
A Co-operative bank, as its name indicates is an institution consisting of a number ofindividuals who join together to pool their surplus savings for the purpose of eliminating the
profits of the bankers or money lenders with a view to distributing the same amongst the
depositors and borrowers.
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COMPARATIVE STUDY BETWEEN COMMERCIAL BANK AND CO-OPERATIVE BANK
S.I.E.S COLLEGE OF COMMERCE AND ECONOMICS, SION 20
3.2 ORIGIN OF CO-OPERATIVE BANKING
The beginning co-operative banking in India dates back to about1904, when official
efforts were made to create a new type of institution based on principles of co-operative
organization & management, which were considered to be suitable for solving the problems
peculiar to Indian conditions. The philosophy of equality, equity and self help gave way to the
thoughts of self responsibility and self administration which resulted in giving birth of co-
operative. The origin on co-operative movement was one such event-arising out of a situation of
crisis, exploitation and sufferings. Co-operative banks in India came into existence with the
enactment of the Agricultural Credit Co-operative
Societies Act in 1904. Co-operative bank forms an
integral part of banking system in India. Under the act of
1904,a number of co-operative credit societies were
started. Owing to the increasing demand of co-operative
credit, a new act was passed in 1912, which was provided
for establishment of co-operative central banks by a union
of primary credit societies and individuals. Co-operative Banking Co-operative Banks in
India are registered under the Co-opera tive Socie ties Act. The cooperative bank
is also regulated by the RBI. They are g ov er ne d by th e Ba nk in g Re gu lat io ns
Act 1949 and Banking Laws (Co-operative Societies) Act, 1965. The origins of the
cooperative banking movement in India can be traced to the close of nineteenth century when,
inspired by the success of the experiments related to the cooperative movement in Britain and the
cooperative credit movement in Germany, such societies were set up in India. Now, Co-operative
movement is quite well established in India. The first legislation on co-operation was passed in
1904. In 1914 the Maclagen committee envisaged a three tier structure for co-operative banking
viz. Primary Agricultural Credit Societies (PACs) at the grass root level, Central Co-operative
Banks at the district level and State Co-operative Banks at state level or Apex Level. In thebeginning of 20th century, availability of credit in India, more particularly in rural areas, was
almost absent. Agricultural and related activities were starved of organized, institutional credit.
The rural folk had to depend entirely on the money lenders, who lent often at usurious rates of
interest.
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COMPARATIVE STUDY BETWEEN COMMERCIAL BANK AND CO-OPERATIVE BANK
S.I.E.S COLLEGE OF COMMERCE AND ECONOMICS, SION 21
3.3 OPERATION OF CO-OPERATIVE BANKING
Establishments:
Co-operative bank performs all the main banking functions of deposit mobilization,supply of credit and provision of remittance facilities.
Co- oper a t i ve Banks be l ong t o t he money mar ke t a s we l l a s t o t hecapital market.
Co-operative Banks provide limited banking products and are functionally specialists inagricultural related products. However, co-operative banks now provide housing loans
also.
UCBs provide working capital loans and term loan as well.
The basic principles on which a Co-operative bank works are:
A co-operative character of activities and trait of mutual aid of credit granted. Catering for collective organizations and their members. Restriction on the number of individual votes. As a result, during 2007-08, the Primary
Cooperative Agriculture and Rural Development Banks have again started lending for the
Non-Farm Sector including Jewel Loans.
Aiming at high rates on deposits and low rates on lending. Limitation of dividends out of profits and bonus to depositors and borrowers or grants to
cultural or co-operative endeavour.These banks are constituted of voluntary association,
self-help and mutual aid, one share one vote and non-discrimination.
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COMPARATIVE STUDY BETWEEN COMMERCIAL BANK AND CO-OPERATIVE BANK
S.I.E.S COLLEGE OF COMMERCE AND ECONOMICS, SION 22
3.4 ROLE OF CO-OPERATIVE BANKING IN INDIA
Co-operative Banks are much more important in India than anywhere else in the world.
The distinctive character of this bank is service at a lower cost and service without exploitation.
It has gained its importance by the role assigned to them, the expectations they are supposed to
fulfill, their number, and the number of offices they operate. Co-operative banks role in rural
financing continues to be important day by day, and their business in the urban areas also has
increased phenomenally in recent years mainly due to the sharp increase in the number of
primary co-operative banks. In rural areas, as far as the agricultural and related activities are
concerned, the supply of credit was inadequate, and money lenders would exploit the poor
people in rural areas providing them loans at higher rates. So, Co-operative banks mobilize
deposits and purvey agricultural and rural credit with a wider outreach and provide institutional
credit to the farmers. Co-operative bank have also been an important instrument for various
development schemes, particularly subsidy-based programmers or poor. The Co-operative
banks in rural areas mainly finance agricultural based activities like:
Farming
Cattle
Milk
Hatchery
Personal finance
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COMPARATIVE STUDY BETWEEN COMMERCIAL BANK AND CO-OPERATIVE BANK
S.I.E.S COLLEGE OF COMMERCE AND ECONOMICS, SION 23
The Co-operative banks in urban areas finance in activities like:
Self-employment
Industries
Small scale units
Home finance
Consumer finance
Personal finance
Some of the forward looking Co-operative banks have developed sufficient core
competencies to such an extent that they are able to challenge state and private sector banks. The
exponential growth of Co-operative banks is attributed mainly to their much better contacts with
the local people, personal interaction with customers, and their ability to catch the nerve of the
local clientele. The total deposits and landings of Co-operative banks are much more than the
Old Private Sector Banks and the New Private Sector Bank.
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COMPARATIVE STUDY BETWEEN COMMERCIAL BANK AND CO-OPERATIVE BANK
S.I.E.S COLLEGE OF COMMERCE AND ECONOMICS, SION 24
3.5 CO-OPERATIVE BANKS SHARE SOME COMMON FEATURES
FOR THEIR CUSTOMER BENEFIT
Customer's owned entities :In a co-operative bank, the needs of the customers meet the needs of the owners, as
co-operative bank members are both. As a consequence, the first aim of a co-operative
bank is not to maximize profit but to provide the best possible products and services.
Co-operative Banking members:Some co-operative banks only operate with their members but most of them also
admit non-member clients to benefit from their banking and financial services.
Customer'sownedentities
Co-operativeBankingmembers
Democratic
membercontrol
Profitallocation
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COMPARATIVE STUDY BETWEEN COMMERCIAL BANK AND CO-OPERATIVE BANK
S.I.E.S COLLEGE OF COMMERCE AND ECONOMICS, SION 26
3.6 CLASSIFICATION OF CO-PERATIVE BANKS
The Co-operative banking structure in India comprises of:
1. Urban Co-operative Banks
2. Rural Co-operatives
Some co-operative banks are scheduled banks, while others are non-scheduled banks. For
instance, State Co-operative banks and some Urban Co-operative banks are scheduled banks but
other co-operative banks are non-scheduled banks. Scheduled banks are those banks which have
been included in the second schedule of the Reserve bank of India act of 1934.The banks
included in this schedule list should fulfill two conditions.
1. The paid capital and collected funds of bank should not be less than Rs. 5lac.
CLASSIFICATION OF CO-OPERATIVEBANK
Urban co-operatives
banks
Rural co-operative
bank
Short- term rural
co-operatives
State co-
operative
bank
Central
co-
operativebanks
Primary
agricultu
ral
sector
Long -term
rural co-
operatives
State co-
operative
agricultraland rural
developm
ent bank
Primaryco
-operative
agricultraland rural
developm
ent bank
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COMPARATIVE STUDY BETWEEN COMMERCIAL BANK AND CO-OPERATIVE BANK
S.I.E.S COLLEGE OF COMMERCE AND ECONOMICS, SION 27
2. Any activity of the bank will not adversely affect the interests of depositors.
Every Scheduled bank enjoys the following facilities.
1. Such bank becomes eligible for debts/loans on bank rate from the RBI
2. Such bank automatically acquires the membership of clearing house.
[A] Urban Co-operative Banks:
Urban Co-operative Banks is also referred as Primary Co-operative banks by the Reserve
Bank of India. Among the non-agricultural credit societies urban co-operative banks occupy an
important place. This bank is started in India with the object of catering to the banking and credit
requirements of the urban middle classes.
The RBI defines Urban Co-operative banks as small sized co-operatively organized
banking units which operate in metropolitan, urban and semi-urban centers to cater mainly to the
needs of small borrowers, viz. owners of small scale industrial units, retail traders, and
professional and salaries classes.Urban Co-operative banks mobilize savings from the middle
and lower income groups and purvey credit to small borrowers, including weaker sections of the
society.
[B] Rural Co-operatives:Rural Cooperative Banking plays an important role in meeting the growing credit needs of
rural population of India. It provides institutional credit to the agricultural and rural sector. One
important feature of providing agriculture credit in India has-been the existence of a widespread
network of rural financial institutions. The Rural Co-operative structure has traditionally been
bifurcated into two parallel wings, i.e.
I. Short-term Rural Co-operatives,II. Long-term Rural Co-operatives.
There is a larger network of co-operative banks in the rural sector, consisting of 29 State
Co-operative Banks and 367 District Central Co-operative Banks, with 13,025 branches. The
RBI Governor's proposals should, therefore, encompass the entire Co-operative banking system.
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COMPARATIVE STUDY BETWEEN COMMERCIAL BANK AND CO-OPERATIVE BANK
S.I.E.S COLLEGE OF COMMERCE AND ECONOMICS, SION 28
I. Short-term Rural Co-operatives:
The short-term rural co-operatives provide crop and other working capital loans to farmers
and rural artisans primarily for short-term purpose. These institutions have federal three-tier
structure. At the Apex of the system is a State Co-operative bank in each state. At the middle (or
district) level, there are Central Co-operative Banks also known as District Co-operative banks.
At the lowest (or village) level, are the Primary Agricultural Credit Societies.
i. State Co-operative Banks:State Co-operative Banks are the apex of the three-tier Co-operative structure
dispensing mainly short/medium term credit. It is the principal society in a State which is
registered or deemed to be registered under the Government Societies Act, 1912, or any
other law for the time being in force in India relating to co-operative societies and the
primary object of which is the financing of the other societies in the State which are
registered or deemed to be registered. The State Co-operative Banks receive current and
fixed deposits from its constituent banks as well as savings, current and fixed deposits
from the general public and from local boards, other local authorities, etc. Further, they
receive loans from the RBI and NABARD.
ii. Central Co-operative Banks:Central Co-operative Banks form the middle tier of Co-operative credit
institutions. These are the independent units in as much as the State Co-operative Banks
have control to control or supervise their affairs. They are of two kinds i.e. pure and
mixed. The pure type of Central Banks can be seen in Kerala, Bombay, Orissa, etc.,
while the mixed type can be seen in Andhra Pradesh, Assam, Tamil Nadu, etc. The main
function of Central Co-operative Banks is to finance. Central Co-operative Banks are
acting as intermediaries between the State Co-operative Banks and Primary societies The
central co-operative banks are located at the district headquarters or some prominent
town of the district. These banks have a few private individuals also who provide both
finance and management. The central co-operative banks have three sources of funds,
Their own share capital and reserves Deposits from the public and Loans from the state co-operative banks
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COMPARATIVE STUDY BETWEEN COMMERCIAL BANK AND CO-OPERATIVE BANK
S.I.E.S COLLEGE OF COMMERCE AND ECONOMICS, SION 29
iii. Primary Agriculture Credit Societies:Primary Agricultural Credit Societies is the foundation of the co-operative credit
system on which the superstructure of the short-term co-operative credit system rests. It
deals directly with individual farmers, provide short and medium term credit, supply
agricultural inputs, distribute consume articles and also arrange for the marketing of
products of its members through a c-operative marketing societies. The success of the co-
operative credit movement depends largely on the strength of these village level societies.
The major objective of Primary agricultural Credit Societies is to serves the need of
weaker sections of this society. Government has promoted multi-purpose societies in
tribal areas for the benefit of people living there. Challenges faced by these societies,
apart from improving resources mobilization, are the following:
Improving volume of business Reducing cost of management. Correcting imbalances in loan outstanding. Improving skill of the staff and imparting professionalization Strengthening Management Information System (MIS).
II. Long-term Rural Co-operatives:
The long-term rural co-operative provide typically medium and long-term loans for
making investments in agriculture, rural industries and, in the recent period, housing. Generally,
these co-operatives have two tiers, i.e. State Co-operative Agriculture and Development Banks
(SCARBDs) at the state level and Primary Co-operative Agriculture and Rural Development
Banks (PCARDBs) at the taluka or tehsil level. However, some States have unitary structure
with the state level banks operating through their own branches.
i. State Co-operative Agriculture and Development Banks (SCARBDs):State Co-operative Agriculture and Development Banks constitute the upper-tier
of long term co-operative credit structure. Though long term credit co-operatives have
been allowed to access public deposits under certain conditions, such deposits constitute
a relatively small proportion of their total liabilities. They are mostly dependent on
borrowings for on-lending. The main objective of the Co-operative State Agriculture and
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COMPARATIVE STUDY BETWEEN COMMERCIAL BANK AND CO-OPERATIVE BANK
S.I.E.S COLLEGE OF COMMERCE AND ECONOMICS, SION 30
Rural Development bank is to finance primary agriculture and rural development banks.
The bank undertakes the following functions to achieve the above objectives:-
Floatation of Debentures, Receiving Deposits; Grant of loans to primary cooperative agriculture and rural development banks
for purposes approved by the National Bank for Agricultural and Rural
Development and Registrar of Cooperative Societies;
To function as the agent of any cooperative bank subject to such conditions asthe Registrar may specify.
ii. Primary Co-operative Agriculture and Rural Development Banks (PCARDBs):Primary Co-operative Agriculture and Rural Development Banks are the lowest
layer of long term credit co-operatives. It is primarily dependent on the borrowings for
their lending business. They provide credit for developmental purposes like minor
irrigation, cultivation of plantation crops and for diversified purposes like poultry,
dairying and sericulture on schematic basis. They get requisite financial assistance from
the Cooperative State Agriculture and Rural Development Bank. In order to widen their
scope of lending to compete with other financial agencies, the primary cooperative
agriculture and rural development banks have been permitted to finance artisans,craftsman and small scale entrepreneurs. They have also been permitted to issue loans to
small road transport operators in rural areas for purchase of goods carriers and passenger
vehicles.
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COMPARATIVE STUDY BETWEEN COMMERCIAL BANK AND CO-OPERATIVE BANK
S.I.E.S COLLEGE OF COMMERCE AND ECONOMICS, SION 31
3.7 FUNCTIONS OF CO-OPERATIVE BANKS
They also perform the basic banking functions of banking but they differ from commercial
banks in the following respects:
Commercial banks are joint-stock companies under the companies act of 1956, or publicsector bank under a separate act of a parliament whereas co-operative banks were
established under the co-operative societys acts of different states.
Commercial bank structure is branch banking structure whereas co-operative banks havea three tier setup, with state co-operative bank at apex level, central /district co-operative
bank at district level, and primary co-operative societies at rural level.
Only some of the sections of banking regulation act of 1949 (fully applicable tocommercial banks), are applicable to co-operative banks, resulting only in partial control
by RBI of co-operative banks.
Co-operative banks function on the principle of cooperation and not entirely oncommercial parameters.
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COMPARATIVE STUDY BETWEEN COMMERCIAL BANK AND CO-OPERATIVE BANK
S.I.E.S COLLEGE OF COMMERCE AND ECONOMICS, SION 32
3.8 REFORMS IN CO-OPERATIVE SOCIETIES ACT
As making legal amendments is time consuming process, the state governments may issue
Executive Orders under the existing powers to bringing the desired reforms which will relate to:
1) Ensuring full voting membership rights on all users of financial services includingdepositors in cooperatives other than cooperative banks.
2) Removing state intervention in all financial and internal administrative matters incooperatives.
3) Providing a cap of 25% on government equity in cooperatives and limiting participationin the Boards of cooperative banks to only one nominee. Any state government or a
cooperative wishing to reduce the state equity further would be free to do so and the
cooperative will not be prevented from doing so.
4) Allowing transition of cooperatives registered under the CSA to migrate under theParallel Act (wherever enacted)
5) Withdrawing restrictive orders on financial matters.
6) Permitting cooperatives in all the three tiers freedom to take loans from any financialinstitution and not necessarily from only the upper tier and similarly placing their
deposits with any regulated financial institution of their choice.
7) Permitting cooperatives under the parallel Acts (wherever enacted) to be members ofupper tiers under the existing cooperative societies Acts advice-versa.
8) Limiting powers of state governments to supersede Boards.
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3.9 BENEFITS of co-operative banks
Quick customer serviceThe bank was able to substantially decrease the time a customer spends at the
counter as the software provides a single view of all accounts of the customer. Which
made the bank better as per their customers?
Reduced redundant tasksReducing redundant tasks meant more resources available for recovery. So,
customer was getting quick facilities.
1. Quick customer service
2. Reduced redundant tasks
3. New delivery channels
4. Funds transfer made easy
5. Multiple delivery channels
6. Extended Transaction Hours
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New delivery channelsThe bank was able to achieve business success because of the operational efficiency
made possible by technologies such as Internet Banking, Touch Screen Banking, and
Mobile Alerts to its customers. Due to which customer were very happy.
Funds transfer made easyThe bank was able to introduce EFT Scheme in urban c-operative banks to affect
remittances on behalf of their customers to various places in the country. Under this
service, funds are transferred from one place to another within a short time. This facility
was made available to the customers of co-operative banks recently. The scheme also
enabled better customer service to rural and semi urban customers.
Multiple delivery channelsThe bank was able to provide Any Branch Banking service to its rural and semi urban
customers since 1997 by using high-end software and hardware equipment and network.
The people at SUCO Bank appreciate the value of time and energy of the customers. By
introducing Tele-banking facility, SUCO Bank has ensured that the customers can access
their account details through telephone lines without leaving the comfort of their home
and not having to travel long distances.
Extended Transaction HoursSUCO Bank is the only bank to initiate transaction facilities beyond the regular banking
transaction hours. This amply displays the commitment of the bank to customer service.
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CHAPTER 4: DISTINGUISH BETWEEN COMMERCIAL BANKS & CO-
OPERATIVE BANKS
COMMERCIAL BANKS CO-OPERATIVE BANKS
1. Registration
In India, the Commercial Banks are
required to be registered under
Banking Regulation Act, 1949.
In India, the Co-operative
Banks are required to be
registered under the Co-
operative Societies Act, of the
concerned state.
2. Main Objective
The main objective of a Commercial
Bank is to accept deposits from
public for the purpose of lending to
industry and commerce.
Main objective of this bank is
to accept deposits from the
members and the public for
the purpose of providing loans
to farmers and small
businessmen with a motto of
service.
3. Availability of Funds
Massive funds are available at the
disposal of Commercial Banks.
Limited funds are available at
the disposal of Co-operativebanks
4. Area of Operation
Commercial banks operate over a
larger area. Some commercial banks
even have branches in foreign
countries.
The area of operations of Co-
operative Banks is limited and
mostly confined to State. They
do not operate at national level
nor international level.
5. Nationalization At present 20 Commercial Banks
have been nationalized in India.
In India Co-operative Banks
are not nationalized.
6. Merchant Banking
Services
Commercial Banks provide
merchant banking services such as
advising the companies regarding
the public issue of shares.
Co-operative Banks do not
provide merchant banking
services.
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7. Mutual Funds
Commercial Banks in India such as
Canara Bank, Bank of India, State
Bank of India, do operate mutual
funds.
At present co-operative banks
in India do not operate mutual
funds.
8. Basis of operation
Commercial bank operates on the
commercial principles. They operate
to earn a profit.
The basis of operations is on
co-operative lines, i.e. service
to its members and the society.
9. Rate of Interest
The Commercial Banks provide a
lesser rate of interest as compared to
co-operative banks.
The Co-operative Banks
provide a little higher rate of
interest on deposits as
compared to commercial
banks.
10.Risk Commercial banks are safer than co-
operative banks.
Co-operative banks are more
risky than commercial banks.
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CHAPTER 5: CONCLUSION
Banking has a part & parcel of our
day-to-day life. Banking is a service industry.
Indian banking system, over the years has
gone through various phases after
establishment of RBI in 1935, during the
British rule, to function as central bank of the
country. On July 19, 1969, the government
promulgated banking companies (Acquisition
& Transfer of Undertakings) Ordinance 1969, to acquire 14 bigger commercial banks with paid
up capital of Rs. 1813 crore and with 4134 branches accounting for 80% advance. Subsequently
in 1980, six more banks were nationalized which brought 91% of the deposits & 84% of
advances in public sector banking.
Commercial banks in India where half of the 19th century started during the latter. Three
presidency banks dominated the banking space i.e. Bank of Bengal, Bank of Bombay & Bank of
Madras. These were set up by special charter of the British government. The government
continued to handle the issuance of currency notes and coins until the central bank i.e. Reserve
Bank of India were set up in 1935.
Now, it is very much clear that co-operative banks have very much importance in
national development. Without the help of co-operative banks, millions of people in India would
be lacking the much needed financial support. Co-operative banks take active part in local
communities and local development with a stronger commitment and social responsibilities.
These banks are best vehicles for taking banking to doorsteps of common men, unbanked people
in urban and rural areas. Their presence in the social, economic and democratic structure of the
country is essential to bring about harmonious development and that perhaps is the bestjustification for nurturing them and strengthening their base. These banks are sure to win in the
race because they are from the people, by the people and of the people.
Now a day Co-operative Banks are started functioning like the Commercial Banks.
Hence, there is lots of competition in between Commercial & co-operative banks.
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RECOMMENDATIONS
Commercial banks are primarily profit making institution. All their activities are
therefore directed towards the making of profit. So for the some reason this bank has to make
new innovations in providing loans, deposits, their products for attract the customers.
It is apparent that the mountain overdue has become a major problem of most of the co-
operative banks and their performance in managing Non-performing Assets is not satisfactory.
Firm measure should be followed to make credit appraisal, documentation, disbursement,
monitoring, etc
These banks can also go for such schemes for opening of saving bank and other accounts
treated as low cost deposit base as well as clientele base of the banks will take remarkable shape.
In this respect, banks can introduce effectively various innovative deposit schemes like womens
savings, childrens savings, savings scheme for youth, daily collection etc.
Some Co-operative banks particularly which are small banks not having sufficient branch
network are suggested to enter into tie-up arrangements with commercial banks like ICICI Bank,
HDFC Bank, etc and in this way these banks could expand their business.
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BIBLIOGRAPHY
BOOKS:-
Indian Banking in New Millennium- G.V.R Manian
Banking Development In India-Niti Bhasin
Banking Theory and Practice- K.C. Shekhar and Lekshmy Shekhar
Co-operative Banks in IndiaFunctioning and Reforms- Amit Bhasak
WEBSITES:-
www.indiatimes.com en.wikipedia.org/wiki/Cooperative_banking. www.banknetindia.com/banking/cintro.html.