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. 
• 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).

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 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 Multi-State Cooperative Societies Act that allowed for registration of societies with operations in more than one state.
• The Banking Regulation (Amendment) Act, 2020 was passed in 2020 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. 
  

Why in News?

• In order to strengthen Primary Agricultural Credit Societies (PACS), the project for Computerization of 63,000 functional PACS with a total financial outlay of ₹2,516 Crore has been approved by the Government of India, which entails bringing all the functional PACS onto an ERP (Enterprise Resource Planning) based common national software, linking them with NABARD through State Cooperative Banks (StCBs) and District Central Cooperative Banks (DCCBs). 
• The National Level Common Software for the project has been developed by NABARD and ERP trial run has started in 15,783 PACS in 27 States/ UTs so far.
  • PACS are village level cooperative credit societies that serve as the last link in a three-tier cooperative credit structure headed by the State Cooperative Banks (SCB) at the state level. Credit from the SCBs is transferred to the district central cooperative banks, or DCCBs, that operate at the district level. 
  • The attraction of the PACS lies in the last mile connectivity they offer. PACS have the capacity to extend credit with minimal paperwork within a short time.
  • Primary dairy cooperative societies are engaged in procurement of milk from farmers, providing milk testing facilities, cattle feed sale and extension services to members.
  • Primary fishery cooperative societies provide marketing facilities, assist in procuring fishing equipment, fish seed and feed, besides credit facilities to members.