History of Cooperative Banking in India

History of Cooperative Banking in India

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In India, the cooperative movement was founded primarily to address the issue of rural lending. The Cooperative Societies Act, which was passed in 1904, marked the beginning of Indian cooperative banking. In order to "promote thrift, self-help, and collaboration among agriculturists, artisans, and persons of restricted means," this Act set out to establish cooperative credit societies. This Act allowed for the creation of numerous cooperative credit societies. The Cooperative Societies Act of 1912 acknowledged the need for new organisations to be set up for cooperative credit provision, monitoring, and auditing. These institutions included a union of primary societies, central banks, and provincial banks.

Even if steps have been taken to create cooperative organisations and issue cooperative credit, the progress was still insufficient during the time before independence. Even though it has been around for 50 years, cooperative credit only made up 3.1% of all rural lending in 1951–1952. A cooperative bank is a firm that was founded on a cooperative basis and conducts standard banking operations. The Cooperative Banks, like other banks, are established by raising money through share purchases, taking deposits, and making loans.

The following is how cooperative banks differ from joint stock banks:

1. While joint stock banks issue shares with limited responsibility, cooperative banks issue shares with unlimited liability.

2. No matter how many shares a shareholder owns, they all have the same amount of votes in a cooperative bank. The number of shares a shareholder has in a joint stock bank determines how many votes he has.

3. Cooperative banks often focus on rural loans and offer financial support for rural and agricultural activities. The credit requirements of trade and industry are of primary significance to joint stock enterprises.

4. The structure of cooperative banking in India is federal. In the bottom position are Primary Credit Societies. State Cooperative Banks are located at the state level, and central Cooperative Banks are located at the district level.