Features of Cooperative Banks
Cooperative banks have several distinctive features that set them apart from other types of banks. Some of the key features of cooperative banks are:
- Democratic ownership: Cooperative banks are owned and controlled by their members, who have an equal say in the decision-making process, regardless of the size of their deposits or loans. This democratic ownership structure ensures that the bank’s operations are aligned with the interests of its members and the community it serves.
- Social objective: Cooperative banks have a social objective of serving the needs of their members and the community, rather than maximizing profits. They primarily focus on providing banking services to small and medium-sized enterprises, agriculture, and rural communities, which may be underserved by larger commercial banks.
- Limited liability: Cooperative banks have limited liability, which means that the liability of the members is limited to the amount of their share capital and any outstanding loans they may have taken from the bank.
- Profit-sharing: Cooperative banks share their profits with their members in the form of dividends or bonus shares, in proportion to their shareholding or patronage of the bank. This encourages members to use the services of the bank and also promotes a sense of ownership and participation among the members.
- Prudential norms: Cooperative banks are subject to prudential norms and regulations similar to those applicable to other banks. They are required to maintain adequate capital and liquidity levels and to comply with the guidelines issued by the Reserve Bank of India (RBI) and the Registrar of Cooperative Societies in each state.
- Voluntary membership: Membership in cooperative banks is voluntary and open to all individuals and organizations who meet the eligibility criteria. This ensures that the bank’s membership is diverse and represents the interests of the community it serves.
Overall, cooperative banks play an important role in promoting financial inclusion, supporting local businesses, and strengthening communities by providing access to affordable financial services.
