Difference between cooperative bank and commercial bank
Difference between cooperative
bank and commercial bank
Submitted by :
State Bank of
• Schedule banks in India – banks included in second schedule of RBI Act,
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.
• 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
• 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
• 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 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
• 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,
• 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
• Cooperative banks in India finance rural areas under:
• Cooperative banks in India finance urban areas under:
Small scale units
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.
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
Co-operative banks are subject to the rules laid down by the Registrar of Co-operative
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.
In co-operative banks, borrowers are member shareholders, so they have
some influence on the lending policy of the banks, on account of their
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
The Co-operative Banks provide a little higher rate of interest on deposits
as compared to commercial banks.
The NPA of Commercial Bank is high as compared to Cooperative Banks.
internal reasons and external reasons
15. CRR and SLR
The CRR and SLR are less stringent of Cooperative banks than Commercial