26 Differences/Similarities: Commercial Vs. Co-operative Banks
There are 4 different categories of banks in India. These include:
- Commercial Banks – Includes scheduled and non-scheduled banks
- Co-operative Banks
- Regional Rural Banks
- 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. | Features | Co-operative Bank | Commercial Bank |
|---|---|---|---|
| 1 | Governed by whom | Co-operative Societies Act of respective state and Banking regulation act | Banking Regulation Act |
| 2 | Functioning objective | Goal is mutuality and self help. Profit is not the objective | Wealth generation |
| 3 | Is there any voting power to borrowers | Yes | No. Borrowers are account holders. |
| 4 | Ownership | Members of co-operative society | Share holders |
| 5 | Regulatory Body | Reserve Bank of India | Reserve Bank of India |
| 6 | Interest rate on loan | Low | High |
| 7 | Interest offered on deposits | Low | High |
| 8 | Prepayment charges on loans | Nil | Yes |
| 9 | Processing charges on loans | Nil | Yes |
| 10 | Quantum of loan amount offered | Limited | Can be very high |
| 11 | Loan disbursal processing time | Slow | Fast |
| 12 | Eligibiiity criteria to get loan | Not very strict | Very strict |
| 13 | Is membership required to avail loan | Yes | No |
| 14 | Credit score check | Yes | Yes |
| 15 | Shares of bank required to get loan? | Yes | No |
| 16 | Most prominent in | Mainly rural areas. But they also operate in urban areas | Mainly urban areas. But also operate in rural areas in small scale |
| 17 | Range of services offered | Limited | Broad |
| 18 | Credit recovery | Weak | Very strict |
| 19 | Operating scale | Small | Large |
| 20 | Area of operation | Limited to city/state and to some extent outside of state | Across country and outside India |
| 21 | Target audience | Mainly to farmers, small businessmen and rural industries. | Mainly to individuals and businesses |
| 22 | Governing Act | Cooperative Societies Act, 1965 | Banking Regulation Act, 1949 |
| 23 | Funds availability | Limited | Massive |
| 24 | Are they nationalised? | No | Yes |
| 25 | Do they operate mutual funds | No | Yes |
| 26 | Who regulates lending and deposit rates | Respective banks | RBI |
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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