Co-operation · Ch 6 — Urban Co-operative Bank
Meaning and Definition of an Urban Co-operative Bank
Meaning and Definition of an Urban Co-operative Bank
The people of a town — the small trader with a shop in the market, the tailor and the goldsmith working in a lane, the clerk drawing a modest salary, the auto-driver and the vegetable vendor — all need a place where they can keep their small savings safely and, when the need arises, borrow a reasonable sum on fair terms. The large commercial banks of an earlier era were reluctant to deal with such small customers, and the private moneylender charged ruinous rates. The urban co-operative bank grew up to fill exactly this gap, carrying the idea of a credit co-operative society into the wider business of banking in towns and cities.
An urban co-operative bank (UCB) is a co-operative body, registered under the co-operative societies law, that carries on the business of banking in an urban or semi-urban area — accepting deposits from its members and the public, and lending mainly to persons of small and moderate means such as small traders, artisans, self-employed persons and salaried workers. It is a bank in its functions but a co-operative in its ownership and character: it is owned and democratically controlled by its members, works on the principle of self-help through mutual help, and puts service to its members and locality above the maximisation of profit.
The Core Idea in One Line
An urban co-operative bank is a co-operative society doing the work of a bank — it collects the savings of townspeople of small means and lends that money back to them at reasonable rates, keeping the community's money working within the community.
A UCB is often the natural growth of a large urban credit co-operative society: as the society's deposits and lending expand and it begins to deal with the general public, it obtains a banking licence from the Reserve Bank of India and becomes a bank in the full sense. Because it is at once a co-operative society and a bank, it lives under two masters — the Registrar of Co-operative Societies, who controls it as a co-operative, and the Reserve Bank of India, which controls it as a bank. This 'dual regulation' is the single most distinctive feature of urban co-operative banking and is studied closely in Section 5 below.
In the Reserve Bank's own classification, urban co-operative banks are the primary (urban) co-operative banks — the topmost layer of the non-agricultural co-operative credit structure, as distinct from the three-tier rural structure of primary agricultural societies, district central co-operative banks and the state co-operative bank studied in the other chapters of this course.
A co-operative society registered under the co-operative law and licensed by the Reserve Bank of India to carry on banking business in an urban or semi-urban area, accepting deposits and lending mainly to persons of small and moderate means on the principle of self-help through mutual help.
The term used by the Reserve Bank of India and the Banking Regulation Act for an urban co-operative bank — a co-operative society (other than an agricultural credit society) whose principal business is banking and whose paid-up share capital and reserves are of the prescribed minimum.