About Co-operative banks 

• Co-operative banks are financial entities established on a co-operative basis and belonging to their members. This means that the customers of a co-operative bank are also its owners. 
• These banks provide a wide range of regular banking and financial services.

Cooperative movement in India

• By definition, cooperatives are organisations formed at the grassroots level by people to harness the power of collective bargaining towards a common goal. The aim of the co-operative movement was to help farmers overcome the burden of debt and help them sell their products easily to get maximum profit.
• In agriculture, cooperative dairies, sugar mills, spinning mills etc are formed with the pooled resources of farmers who wish to process their produce.
• Cooperative sugar mills account for 35% of the sugar produced in the country.
• In banking and finance, cooperative institutions are spread across rural and urban areas. Village-level primary agricultural credit societies (PACSs) formed by farmer associations are the best example of grassroots-level credit flow. These societies anticipate the credit demand of a village and make the demand to the district central cooperative banks (DCCBs).
• Given that PACSs are a collective of farmers, they have much more bargaining powers than an individual farmer pleading his case at a commercial bank.

Structure of co-operative banks in India

• Broadly, co-operative banks in India are divided into two categories – urban and rural.
• The rural co-operative credit system in India is primarily mandated to ensure flow of credit to the agriculture sector. It comprises short-term and long-term co-operative credit structures.
  • The short-term co-operative credit structure operates with a three-tier system – Primary Agricultural Credit Societies (PACS) at the village level, Central Cooperative Banks (CCBs) at the district level and State Cooperative Banks (StCBs) at the State level.
  • Meanwhile, the long-term institutions are either State Cooperative Agriculture and Rural Development Banks (SCARDBs) or Primary Cooperative Agriculture and Rural Development Banks (PCARDBs).
• Primary Cooperative Banks (PCBs), also referred to as Urban Cooperative Banks (UCBs), cater to the financial needs of customers in urban and semi-urban areas. UCBs are of two kinds- multi-state and those operating in a single state.

What laws govern cooperative societies?

• The functioning of Cooperative Banks is guided by the Cooperative Societies Act of the respective states. 
• While the administrative control of the cooperatives are with the states, its banking functions are regulated by the Reserve Bank of India under the Banking Regulation Act, 1949.
• In 2002, the Centre passed a MultiState Cooperative Societies Act that allowed for registration of societies with operations in more than one state.
• The Banking Regulation (Amendment) Act, 2020 was passed to bring all urban cooperative banks and multi-state cooperative banks under the direct supervision of the RBI, following public scandals in certain banks and claims of mismanagement.
• The National Cooperative Development Corporation (NCDC), a statutory Corporation under the Ministry of Agriculture & Farmers Welfare, works for the promotion of the cooperative movement in India. It is tasked with planning, promoting, coordinating and financing cooperative development programmes at the national level.
• Last year, the Union Government announced the formation of a separate Union Ministry of Cooperation, a subject that till date was looked after by the Ministry of Agriculture. The Ministry of Cooperation aims to provide a separate administrative legal and policy framework for strengthening the cooperative movement in the country.

Why in News?

• The Union Cabinet has approved the Multi-State Cooperative Societies (Amendment) Bill, 2022, which seeks to amend the Multi-State Cooperative Societies Act, 2002 to bring transparency in the sector and reform the electoral process.
• The Bill will incorporate the provisions of the 97th Constitutional Amendment.
• The Bill also seeks to improve the composition of board and ensure financial discipline, besides enabling the raising of funds in the multi-state cooperative societies.
• To make the governance of multi-state cooperative societies more democratic, transparent and accountable, the bill has provisions for setting up of Cooperative Election Authority, Cooperative Information Officer and Cooperative Ombudsman.

Reference:

1. https://www.thehindu.com/news/national/cabinet-okays-amendments-in-multi-state-cooperative-societies-act-to-bring-transparency/article66000876.ece