Context
The research report of SBI recently notify that the Regional rural bank (RRBs)will get an option to graduate into small finance banks(SFBs) as in line with cooperative banks. In 2018, a scheme for the voluntary transition of UCBs into SFBs was introduced to facilitate growth in UCBs.
Co-operative banks and their structure
- Co-operative banks are the types of institutions established on the line of the co-operative societies i.e based on the principle of cooperation. They worked on by collecting funds through shares, accepting deposits, and granting loans.
- They work like co-operative credit societies where members from a community group together extend loans to each other, at favorable terms.
- They are registered as co-operative societies under the Cooperative Societies Act of the state concerned or the Multi-state Cooperative societies act,2002.
- They are governed by the provisions of two acts as
- Banking regulation act, 1949
- Banking laws(cooperative societies) act,1955.
- They are broadly categorized under two categories as Rural and Urban Cooperative Banks.
Urban cooperative banks
- UCBs are referred to as the primary cooperative banks located in urban and semi-urban areas.
- The UCBs, RRBs, and Local Area Banks are categorized under differentiated banks as they operate in localized areas with some specific target group, capital requirements, and fund collection methods.
- They essentially lend money for the growth and development of small businesses.
- RBI revised the Supervisory action framework for UCBs in January 2020.
- Also in June 2020, the central government bring all urban and multi-state cooperatives banks under the direct supervision of RBI with an ordinance.
- Recently, RBI has adopted a four-tier structure for the UCBs on the basis of the size of deposits they have.
