26 Differences/Similarities: Commercial Vs. Co-operative Banks

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There are 4 different categories of banks in India. These include:

  1. Commercial Banks – Includes scheduled and non-scheduled banks
  2. Co-operative Banks
  3. Regional Rural Banks
  4. Payment Banks – This new category of the bank was very recently approved by the Reserve Bank of India.

Although most of the banks offer similar kind of services; there are key differentiating factors. In this article we’ll discuss the differences between commercial and co-operative banks.

Listed in the below table are the similarities and differences between these two categories of the banks:

Sr. No.FeaturesCo-operative BankCommercial Bank
1Governed by whomCo-operative Societies Act of respective state and Banking regulation actBanking Regulation Act
2Functioning objectiveGoal is mutuality and self help. Profit is not the objectiveWealth generation
3Is there any voting power to borrowersYesNo. Borrowers are account holders.
4OwnershipMembers of co-operative societyShare holders
5Regulatory BodyReserve Bank of IndiaReserve Bank of India
6Interest rate on loanLowHigh
7Interest offered on depositsLowHigh
8Prepayment charges on loansNilYes
9Processing charges on loansNilYes
10Quantum of loan amount offeredLimitedCan be very high
11Loan disbursal processing timeSlowFast
12Eligibiiity criteria to get loanNot very strictVery strict
13Is membership required to avail loanYesNo
14Credit score checkYesYes
15Shares of bank required to get loan?YesNo
16Most prominent inMainly rural areas. But they also operate in urban areasMainly urban areas. But also operate in rural areas in small scale
17Range of services offeredLimitedBroad
18Credit recoveryWeakVery strict
19Operating scaleSmallLarge
20Area of operationLimited to city/state and to some extent outside of stateAcross country and outside India
21Target audienceMainly to farmers, small businessmen and rural industries.Mainly to individuals and businesses
22Governing ActCooperative Societies Act, 1965Banking Regulation Act, 1949
23Funds availabilityLimitedMassive
24Are they nationalised?NoYes
25Do they operate mutual fundsNoYes
26Who regulates lending and deposit ratesRespective banksRBI

The ultimate objective of all these banking entities is to increase financial inclusion by reaching people from remotest locations in India and offer various services such as loans, savings account, money transfer, credit cards and many others.

 

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