Structure of Cooperative Credit Institutions in India

Cooperative movement in India was started primarily for dealing with the problem of rural credit. The history of Indian cooperative banking started with the passing of Cooperative Societies Act in 1904. The objective of this Act was to establish cooperative credit societies "to encourage thrift, self-help and cooperation among agriculturists, artisans and persons of limited means."

Many cooperative credit societies were set up under this Act. The Cooperative Societies Act, 1912 recognised the need for establishing new organisations for supervision, auditing and supply of cooperative credit.

These organisations were --

  1. A union, consisting of primary societies;
  2. the central banks; and
  3. provincial banks

Although beginning has been made in the direction of establishing cooperative societies and extending cooperative credit, but the progress remains unsatisfactory in the pre-independence period. Even after being in operation for half a century, the cooperative credit formed only 3.1 per cent of the total rural credit in 1951-52.

Structure of Cooperative Banking:

There are different types of cooperative credit institutions working in India. These institutions can be classified into two broad categories- agricultural and non-agricultural. Agricultural credit institutions dominate the entire cooperative credit structure.

Agricultural credit institutions are further divided into short-term agricultural credit institutions and long-term agricultural credit institutions.

The short-term agricultural credit institutions which cater to the short-term financial needs of agriculturists have three-tier federal structure --

  1. at the apex, there is the state cooperative bank in each state;
  2. at the district level, there are central cooperative banks;
  3. at the village level, there are primary agricultural credit societies.

Long-term agricultural credit is provided by the land development banks. The whole structure of cooperative credit institutions is shown in the chart given.


The structure of cooperative network in India can be divided into 2 broad segments --

  1. Urban Cooperative Banks
  2. Rural Cooperatives

Urban Cooperatives can be further divided into scheduled and non-scheduled. Both the categories are further divided into multi-state and single-state.

Rural Cooperatives are further divided into short-term and long-term structures.

The short-term cooperative banks are three tiered operating in different states.

These are:

  • State Cooperative Banks: They operate at the apex level in states
  • District Central Cooperative Banks: They operate at the district levels
  • Primary Agricultural Credit Societies: They operate at the village or grass-root level.

Likewise, the long-term structures are further divided into --

  1. State Cooperative Agriculture and Rural Development Banks (SCARDS) -- These operate at state-level.
  2. Primary Cooperative Agriculture and Rural Development Banks (PCARDBS) -- They operate at district/block level.

The rural banking cooperatives have a complex monitoring structure as they have a dual control which has led to many problems. A Forum called State Level Task Force on Cooperative Urban Banks (TAFCUB) has been set-up to look into issues related to duality in control.

  • All banking activities are regulated by a shared arrangement between RBI and NABARD.
  • All management and registration activities are managed by RCS.

-- Stay Tuned.

The Kred Team