Credit co-operatives

A credit co-operative is a voluntary association of members where the motto is self help
among the members. These societies mainly cater to the credit needs of the agricultural
sector and unorganised sectors. Co-operative Credit Societies came into existence in
India with the passing of the Co-operative Societies Act of 1904, amended in 1912.

A Co-operative bank is an example of banking institutions established on co-operative

basis. They operate in rural, semi urban and urban areas.

These banks are supported by the government as they get financial assistance from
Central and State Governments. Co-operative banks provide mainly short and medium
term credit.

In India the co-operative banks are organised as a three tier structure:

 Primary Agricultural Credit Societies (PACS) operate at the base level and deal
directly with the farmers, catering to their short and medium term credit
needs. They encourage savings among agriculturalists and gives loans to the
needy farmers.
Their funds are raised by way of share capital, membership fees, deposits from members
and non members and loans from Central Co-operative Banks and the Government.

 Central Co-operative Banks (CCBs) operate at the middle of the three tier
structure. They operate at the district level and serve as a link between the base
level PACs and the money market. Their main function is to provide loans to
the PACS. They give loans to others also and provide remittance facilities. They
shift surplus funds from surplus primary societies to the deficit ones.
They raise working capital mainly from deposits and borrowings. Deposits are mainly
from individuals and co-operative societies.

 State Co-operative Banks (SCBs): are the apex banks and operate at the State
level. They furnish loans to CCBs so as to enable them to lend to the PACS.
They provide a link through which the RBI provides credit to co-operatives. As
they finance the CCBs, they supervise and control CCBs and through them the
PACs. They serve as the leader of the co- operative movement within the State.
Their funds are raised through share capital, accepting deposits from the public, loans
from State Bank and commercial banks. 50 - 90 percent of their working capital is
contributed by the Reserve Bank of India.