What are co-operative banks?
Co-operative banks are small-sized units organised in the co-operative sector which opreate both in urban and non-urban centres.

What is the role of co-operative banks in India’s banking structure?
In India, co-operative banks finance small borrowers in industrial and trade sectors, besides professional and salary classes.

What functions do co-operative banks perform?
Co-operative banks perform the main banking functions of deposit mobilisation, supply of credit and provision of remittance facilities. They provide limited banking products and are specialists in agriculture-related products.

Who acts as the regulator for co-operative banks?
Co-operative banks are regulated by the Reserve Bank of India and governed by the Banking Regulations Act, 1949, and Banking Laws (Co-operative Societies) Act, 1965. Rural co-operative banks are regulated by state registrar of co-operatives.

What is the minimum capital requirement and membership required for co-operative banks ?
Urban co-operative banks should have a minimum capital of Rs 4 crore and a membership of at least 3,000 in a population of more than Rs 10 lakh. The figure of minimum membership keeps decreasing with a decrease in population.

What is the minimum Statuatory Liquidity Ratio (SLR) for co-operative banks?
Urban co-operative banks are required to maintain a SLR equivalent to 25% of net demand and bank liabilities.

What are weak urban co-operative banks?
Urban co-operative banks are divided into weak and urban banks, based on certain parameters of their performance. India has a total of 261 weak banks at the end of June 2001.

When is a co-operative bank classified as a weak one?
A co-operative bank is classifed as a weak bank if its own funds get eroded to the extent of 25% or more by doubtful debts or if its overdues exceed 50% of outstanding loans and advances. Or else, if the bank fails to comply with minimum share capital norms.

How many cases of fraud by co-operative banks were registered with the RBI?
Between June 2000 and June 2001, 149 cases of fraud involving Rs 27 crore were registered with RBI.

What is the punishment for a defaulting co-operative bank?
According to RBI, the punishment differs on a case-to-case basis and is mutually agreed by the apex bank and the Registrar of Co-operative Societies. Like in the case of Ahmedebad-based Madhavpura Mercantile Bank scam in 2001, the RBI made it mandatory for scheduled urban co-operative banks to maintain SLR at 25% of net demand and time liabilities from April 2003 and also seek credit enhancements from state governments for their deposits and bonds.

Define the co-operative banking structure in India.
The co-operative banking structure in India is divided into four components: primary co-operative credit society, central co-operative bank, state co-operative banks and land development banks.

On what basis do these banks function?
Co-operative banks function on the basis of "no-profit no-loss". Co-operative banks, as a principle, do not pursue the goal of profit maximisation.

What are state co-operative banks?
State co-operative banks are a federation of central co-operative banks and act as a watchdog of the co-operative banking structure in the state. Its funds are obtained from share capital, deposits, loans and overdrafts from the Reserve Bank of India. State co-operative banks lend money to central co-operative banks and primary societies and not directly to farmers.

What are central co-operative banks?
Central co-operative banks are the federations of primary credit societies in a district and are of two types – those having a membership of primary societies only and those having a membership of societies as well as individuals. The funds of the bank consists of share capital, deposits, loans and overdrafts from state co-operative banks and joint stocks. These banks finance member societies within the limits of the borrowing capacity of societies.

Do co-operative banks have access to money market?
Although the main aim of a co-operative bank is to provide cheaper credit to their members and not to maximize profits, they may access the money market to improve their income and remain viable.

What are the sources of funds for co-operative banks?
The sources of funds for co-operative banks are: central and state government, Reserve Bank of India and NABARD, other co-operative institutions, ownership funds and deposits or debenture issues. Intra-sectoral flows of funds are much greater in co-operative banking than in commercial banking. Inter-bank deposits, borrowings and credit also form a significant part of assets and liabilities of co-operative banks.