an in in ndia      12.13
                                                          rural areas. Well managed primary UCBs with
        coPeratIve Banks                                  deposits of over Rs. 50 crore are also allowed to
     Banks in India can be broadly classified under       operate in more than one state subject to certain
     two heads—commercial banks and co-operative          norms.
     banks. While commercial banks (nationalised              As they are covered by the RBI Act, 1934
     banks, State Bank group, private sector banks,       (2nd Schedule) they have certain rights and
     foreign banks and regional rural banks) account      obligations—rights of obtaining refinance and
     for an overwhelming share of the banking business,   loans from the RBI and obligations such as
     co-operative banks also play an important role.      maintenance of cash reserves, submission of
     Initially set up to supplant indigenous sources of   returns to the RBI etc. Presently, there are 29
     rural credit, particularly money lenders, today      UCBs.
     they mostly serve the needs of agriculture and       DCCBs & SCBs: As their names suggest, they
     allied activities, rural-based industries and to a   operate at the district and state levels. One district
     lesser extent, trade and industry in urban centres.  can have no more than one DCCB with a number
     Co-operative banks have a three tier structure—      of DCCBs reporting to the SCB. They were under
           (i) Primary        Credit      Societies-PCSs  supervision of the RBI—later on this function was
               (agriculture or urban),                    delegated to the NABARD.
          (ii) District Central Co-Operative Banks-
               DCCBs, and                                 Problems of these bAnks
         (iii) State Co-Operative Banks-SCBc (at the      Co-operative banks play a very vital role in India’s
               apex level).                               financial system they have been faced with certain
     UCBs: Primary credit societies (PCSs) in urban       long-drawn problems also—we may have brief
     areas that meet certain specified criteria can apply look them:
     to RBI for a banking license to operate as urban              Regulation remains the biggest issue as
     co-operative banks (UCBs). They are registered                they are under dual regulatory control—
     and governed under the co-operative societies                 the UCBs come under the RBI and the
     acts of the respective states and are covered by              Registrar of Co-operative Societies (RCS)
     the Banking Regulation Act, 1949—thus are                     of the respective states while the DCCBs
     under dual regulatory control. The managerial                 and SCBs come under the NABARD, the
     aspects of these banks—registration, management,              RBI and the RCSs. Given the close links
     administration, recruitment, amalgamation,                    between politicians and co-operatives and
     liquidation, etc. are controlled by the state                 the fact that the RCS functions under the
     governments, while the matters related to banking             state government, in practice this dual (or
     are regulated by RBI.                                         triple) custody of the co-operative banks
           Traditionally, the area of operation of the             has, in practice, led to poor supervision
     UCBs is confined to metropolitan, urban or semi-              and control. Besides, most co-operative
     urban centres and caters to the needs of small                banks are lacking in skill and expertise.
     borrowers including MSMEs, retail traders, small              Recruitments are politicised as are
     entrepreneurs, professionals and the salaried class.          appointments at most levels.
     However, there is no formal restriction as such and           Income recognition and prudential norms
     today UCBs can conduct business in the entire                 that were introduced for commercial
     district in which they are registered, including              banks in the early 1990s (under the