Unit 5: Non-Agricultural Credit Co-operatives

NON-AGRICULTURAL CREDIT CO-OPERATIVES

These are cooperative institutions that provide credit and financial services to non-agricultural groups, mainly:

• Urban populations
• Salaried employees
• Small traders
• Self-employed persons

They work on cooperative principles: mutual help, self-help, democratic management, and no-profit-no-loss philosophy.

Urban Cooperative Banks (UCBs)

(Co-operative Urban Banks

Urban Cooperative Banks are small-sized cooperative credit institutions located in towns and cities.
They serve urban middle class, traders, small businesses, salaried employees, and self-employed individuals.

Constitution of Urban Cooperative Banks

1. Registration 

• Registered under State Cooperative Societies Act or Multi-State Cooperative Societies Act, 2002.

2. Regulation

• Financial activities regulated by Reserve Bank of India (RBI).
• Administrative control by State Registrar of Cooperative Societies.

3. Membership

• Open to urban residents, traders, professionals, shopkeepers, and employees.
• Members purchase shares and gain voting rights.

4. Management Structure

• General Body → Supreme authority.
• Board of Directors elected democratically.
• Chairman/President leads the board.
• CEO/Manager handles day-to-day operations.

5. Sources of Funds

• Share capital
• Deposits from public
• Borrowings from DCCB/SCB
• Reserve funds
• RBI refinance (limited)

Functions of Urban Cooperative Banks

1. Accepting Deposits

• Savings deposits
• Fixed deposits
• Recurring deposits
• Current accounts (for traders/business)

2. Lending to Urban Population

• Loans for small businesses/trade
• Consumer loans (fridge, TV, laptop)
• Housing loans
• Personal loans
• Vehicle loans
• Gold loans
• Loans to small industries and MSMEs

3. Support for Urban Economic Activities

• Encouraging small-scale industries
• Providing loans for shop expansion, working capital
• Supporting self-employment

4. Financial Inclusion

• Serves low-income groups ignored by commercial banks
• Offers affordable interest rates

5. Social and Developmental Role

• Promotes thrift
• Encourages habit of savings
• Reduces dependence on moneylenders

Employees’ Cooperative Thrift and Credit Societies

These societies are formed by employees working in the same organization—like:

• Government departments
• Universities/colleges
• Banks
• Railways
• Factories
• Private companies

Purpose: encourage savings and provide easy credit to employees.

Constitution of Employees’ Thrift & Credit Societies

1. Membership

• Only employees of a particular organization/institution can become members.
• They contribute monthly savings to build common funds.

2. Registration

• Registered under State Cooperative Societies Act.
• Controlled by Registrar of Cooperative Societies.

3. Management

• General Body of employees
• Elected Managing Committee/Board
• President / Secretary / Treasurer
• Internal auditor

4. Sources of Funds

• Monthly thrift savings
• Share capital
• Deposits from members
• Loans from apex cooperative banks
• Reserve funds

Functions of Employees’ Thrift and Credit Societies

1. Thrift (Savings)

• Encourage employees to save regularly.
• Savings deducted monthly from salary.

2. Credit (Loans)

Provide low-interest, easily repayable loans to members for:

• Personal needs (medical, education, marriage)
• House repair
• Festivals
• Emergency expenses
• Consumer goods
• Two-wheeler purchase

3. Interest Rates

• Much lower than private lenders.
• EMI recovered directly from salary.

4. Welfare Activities

Some societies conduct:

• Group insurance
• Scholarship for children
• Emergency relief fund
• Retirement benefit schemes

5. Financial Discipline

• Helps employees avoid high-interest loans from moneylenders
• Promotes saving habit and financial planning

Benefits of Thrift & Credit Societies

• Easy availability of loans
• Low interest rate
• No strict collateral
• Salary-based repayment
• Social bonding among employees
• Financial support during emergencies

Summary Table

Topic	Urban Cooperative Banks	Employees’ Thrift & Credit Societies
Members	Urban residents, traders	Employees of same organization
Purpose	Urban credit & deposit services	Savings + easy loans for staff
Regulated By	RBI + Registrar	Registrar
Loans Offered	Business, housing, personal, MSME	Personal, emergency, consumption
Deposit Facility	Open to public	Only for members
Management	Board of Directors	Managing Committee
Benefits	Financial inclusion, support for urban economy	Low-interest credit, compulsory saving

Co-operative Housing Societies

Co-operative Housing Societies are member-owned associations formed to:

• Provide residential houses, plots, or flats to members
• Manage and maintain housing colonies
• Provide finance for house construction or repair

They work on the no-profit-no-loss principle.

Objectives

• Provide affordable housing
• Purchase land and develop plots
• Construct apartments/colonies
• Offer house loans at reasonable rates
• Maintain common facilities (water, electricity, security, waste management)

Types of Housing Societies

1. Tenant Ownership Societies

• Society owns the land
• Members own the structure (house)

2. Tenant Co-partnership Societies

• Society owns both land and building
• Members get the right to occupy units

3. House Mortgage Societies

• Provide loans for house building and renovation

Functions

• Buy land and develop housing plots
• Construct buildings and sell to members
• Provide long-term housing loans
• Maintain buildings, roads, drainage, and security
• Collect maintenance charges
• Handle legal documentation
• Resolve disputes among members

Benefits

• Affordable housing
• Transparent administration
• Community living
• Better maintenance of property
• Easy loan availability

Industrial Co-operative Banks

Industrial Cooperative Banks are cooperative financial institutions that provide credit to:

• Small-scale industries
• Cottage industries
• Micro industries
• Handicrafts and artisans
• Self-employed industrial workers

They help in industrial development and employment generation.

Constitution

• Registered under State Cooperative Societies Acts.
• Operate at district or state level.
• Members include small manufacturers, artisans, craftsmen, and small entrepreneurs.

Functions

1. Provide Medium and Long-Term Loans

• Machinery purchase
• Tools and equipment
• Working capital
• Raw materials
• Factory construction

2. Technical and Managerial Assistance

• Helps artisans adopt modern techniques
• Skill development training

3. Support to Cottage and Village Industries

• Handloom, handicrafts, pottery, woodwork, metalwork

4. Marketing Assistance

• Helps sell products
• Provides market linkages

5. Mobilize Savings

• Accept deposits from members

Importance

• Encourages self-employment
• Promotes local industrial growth
• Reduces dependence on moneylenders
• Supports MSME sector

NABARD (National Bank for Agriculture and Rural Development)

(a) Establishment

• Established in 1982
• Apex institution for agriculture and rural development finance
• Headquarters: Mumbai

(b) Roles & Functions

1. Refinance Institution

Provides refinance to:

• Cooperative banks
• RRBs
• Commercial banks for agricultural and rural development loans.

2. Supervisory Functions

• Inspects and supervises cooperative banks and RRBs.

3. Developmental Role

• Promotes rural industries, SHGs, microfinance, FPOs
• Implements watershed development, irrigation, dairy schemes

4. Credit Planning

• Prepares district and state credit plans for agriculture

5. Infrastructure Development

• Operates RIDF (Rural Infrastructure Development Fund)

6. Promotion of Cooperatives

• Strengthens PACS, DCCBs, SCBs through training and modernization

Importance

• Backbone of rural finance
• Ensures credit flow to farmers and rural entrepreneurs
• Supports government schemes like KCC, PMFBY, and rural roads

RBI (Reserve Bank of India)

(Role in Cooperative Sector)

(a) Supervisory Role

RBI regulates:

• Urban Cooperative Banks (UCBs)
• State Cooperative Banks (SCBs)
• District Central Cooperative Banks (DCCBs) (financial matters only; administrative control by Registrar)

(b) RBI’s Functions for Cooperatives

1. Licensing

• Issues banking licenses to cooperative banks.

2. Prudential Norms

• Capital adequacy
• CRR and SLR rules
• NPA norms
• Audit and inspection standards

3. Credit Regulation

• Priority sector lending guidelines
• Interest rate guidelines for certain schemes

4. Financial Stability

• Ensures cooperative banks maintain solvency and liquidity
• Protects depositors’ interests

5. Collaboration with NABARD

• NABARD acts as RBI’s supervisory agent for rural cooperatives.

Summary Table 

Topic	Key Points
Co-operative Housing Societies	Provide affordable housing, loans, maintenance services
Industrial Co-operative Banks	Finance small industries, artisans, MSMEs
NABARD	Apex rural development bank; refinance, supervision, development
RBI	Regulates cooperative banks’ financial operations