Difference between cooperative bank and commercial bank

Submitted by :

Nidhi Sharma

13609027

Banks

Commercial Banks

Scheduled Banks

Indian Banks

Public Sector

State Bank of India (6)

Nationalized bank (26)

Private Sector

Foreign Banks (32)

Non Scheduled Banks

Regional Rural Banks

Cooperative Banks

Old private sector banks

(14)

New private sector banks

(7)

• Schedule banks in India – banks included in second schedule of RBI Act, 1934.

In schedule banks the capital and collected funds of bank should not less than Rs. 5 lac.

• Non Schedule bank – banks not included in RBI Act, 1934 are non scheduled banks and their capital and collected funds less than 5 lac.

Commercial bank

• A commercial bank is a financial institution that is authorized by law to receive money from businesses and individuals and lend money to them. Commercial banks are open to the public and serve individuals, institutions and businesses.

• Banks are regulated by federal and state laws depending on how they are organized and the services they provide. Commercial banks are also monitored through the Federal Reserve System.

Function of commercial bank

• Receive deposits - take money in from individuals and businesses (called depositors)

• Disburse payments - make payments upon the direction of its depositors (such as honoring a check)

• Collections - a bank will act as your agent to collect funds from another bank payable to you (such as when someone pays you by check drawn on an account from a different bank)

• Invest funds in securities for a return• Safeguard money - banks are considered a safe place to store your wealth• Maintain and service savings and checking accounts of its depositors• Maintain custodial accounts - accounts controlled by one person but for the

benefit of another person, such as a trust account• Lend money

Cooperative bank

• Cooperative banks are organized and managed on principles of cooperative, self help and mutual help.

• It is for mutual benefit, along side helping members and public funding.

• The main objective of cooperative bank is not to earn profit i;e no profit no loss

• First institution which are gvt sponsored, gvt supported and gvt subsidized financial agencies help by RBI, NABARD, State gvt, Central gvt.

• Primarily do business in agriculture and rural sectors as providing loan to agriculturists and facility to rural sector

• UCB, SCB and CCB operate in urban areas, semi urban and metro politician cities also and finance for non agriculture business also.

• Urban cooperative banks advice to lend 60% of total advances to priority sector

• Cooperative banks in India finance rural areas under: FarmingCattleMilkHatcheryPersonal finance 

• Cooperative banks in India finance urban areas under: Self-employment IndustriesSmall scale unitsHome financeConsumer financePersonal finance

1 Registration In India, the Commercial Banks are required to be registered under Banking Regulation Act, 1949.

In India, the Co-operative Banks are required to be registered under the Co-operative Societies Act, of the concerned state, and regulated by cooperative societies and RBI.

2. Main Objective The main objective of a Commercial Bank is to accept deposits from public for the purpose of lending to industry and commerce.

The main objective of a Co-operative Bank is to accept deposits from the members and the public for the purpose of providing loans to farmers and small businessmen with a motto of service.

3. Types Commercial banks in India are of two types: (i) public sector banks and (ii)

private sector banks. Co-operative banks are private sector banks.4. Availability of Funds

Massive funds are available at the disposal of Commercial Banks. Limited funds are available at the disposal of Co-operative Banks.

5. Area of Operation Commercial banks operate over a larger area. Some commercial banks even

have branches in foreign countries. The area of operations of Co-operative Banks is limited and mostly confined

to State. They do not operate at national level nor international level.6. Subject to Commercial banks are subject to the control of the Reserve Bank of India

directly. Co-operative banks are subject to the rules laid down by the Registrar of Co-

operative Societies

7.Nationalisation At present 20 Commercial Banks have been nationalised in India.

In India Co-operative Banks are not nationalised.

8. Merchant Banking Services Commercial Banks provide merchant banking services such as advising the

companies regarding the public issue of shares. Co-operative Banks do not provide merchant banking services.

9. Mutual Funds Commercial Banks in India such as Canara Bank, Bank of India, State Bank of India,

do operate mutual funds. At present co-operative banks in India do not operate mutual funds.

10. Basis of operation Commercial banks operates on the commercial principles. They operate to earn a

profit. The basis of operations is on co-operative lines, i.e. service to its members and

the society.

11. Provide Finance Commercial banks mostly provide short-term finance to industry, trade and

commerce, including priority sectors like exports, etc. Co-operative banks usually cater to the credit needs of agriculturists. 12. Borrowers In co-operative banks, borrowers are member shareholders, so they have some

influence on the lending policy of the banks, on account of their voting power. Borrowers of commercial banks are only account- holders and have no voting

power as such, so they cannot have any influence on the lending policy of these banks.

13. Rate of Interest The Commercial Banks provide a lesser rate of interest as compared to co-

operative banks. The Co-operative Banks provide a little higher rate of interest on deposits

as compared to commercial banks.14. NPA The NPA of Commercial Bank is high as compared to Cooperative Banks. reasons: speculation default internal reasons and external reasons15. CRR and SLR The CRR and SLR are less stringent of Cooperative banks than Commercial

banks.

Thank you