DEVELOPMENT BANKS

      Development banks are those financial institutions which provide long term capital for industries and agriculture.

1. Industrial Finance Corporations Of India (IFCI)
2. Industrial Development Bank Of India (IDBI)
3. Industrial Credit And Investment Corporation Of India (ICICI) That Was Merged With The ICICI Bank In 2000.
4. Industrial Investment Bank Of India (IIBI)
5. Small Industries Development Bank Of India (SIDBI)
6. National Bank For Agriculture And Rural Development (NABARD)
7. Export Import Bank Of India, National Housing Bank (NHB).

The commercial banking network essentially catered to the needs of general banking and for meeting the short-term working capital requirements of industry and agriculture. Specialised development financial institutions (DFIs) such as the IDBI, NABARD, NHB and SIDBI, etc. with majority ownership of the Reserve Bank were set up to meet the long-term financing requirements of industry and agriculture. To facilitate the growth of these institutions, a mechanism to provide concessional finance to these institutions was also put in place by the Reserve Bank. Government utilized the institutions for the achievements in planning and development of the nation as a whole.

S.H. Khan Committee appointed by RBI (1997) recommended transforming the DFI (Development Finance institutions) into universal banks that can provide a menu of financial services and leverage on their assets and talent.

CO-OPERATIVE BANKS

Co-operative bank established by structural lines registered under The Co-Operative Societies Act 1912. Co-operative Banks are organised and managed on the principle of co-operation, self-help and mutual help. Co-operative banks, as a principle, do not pursue the goal of profit maximisation.  Co-operative bank performs all the main banking functions of deposit mobilisation, supply of credit and provision of remittance facilities. It provides limited banking products and is functionally specialists in agriculture related products. However, co-operative banks are now providing housing loans also. Co-operative Banks belong the money as well as to the capital market – they offer short term and long term loans.

URBAN CO-OPERATIVE BANKS (UCBS) are located in urban and semi-urban areas. These banks, till 1996, were allowed to lend money only for non-agricultural purposes. This distinction does not hold today. Earlier, they essentially lent to small borrowers and businesses. Today, their scope of operations has widened considerably. Urban CBs provide working capital, loans and term loan as well.

Primary Agricultural Credit Societies provide short term and medium term loans. These Co-operative banks operate at Village level. They provide short term loan to agriculture (1 year to 3 years). State Cooperative Banks and Central Cooperative Banks at the district level provide both short term and term loans. Land Development Banks provide long-term loans.

Some co-operative bank is scheduled banks, while others are non-scheduled banks. For instance, SCBs and some UCBs are scheduled banks (included in the Second Schedule of the RBI Act).

Co-operative Banks are subject to CRR and SLR requirements as other banks. However, their requirements are less than commercial banks.

Although The Main Aim of the co-operative bank is to provide cheaper credit to their members and not to maximize profits, they may access the money market to improve their income so as to remain viable.

Co-operative Credit Institution

Rural Co-operative                                                 Urban co-operative

Credit Institutions                                                  Credit Institutions

Short term Structure                                         Long term Structure                     

    Structure            District             Primary   

Co-operative     Co-operative     Agricultural

Banks              Banks     Credit Societies

Structure            Primary

Co-operative      Co-operative

and Rural           Agricultural

Development Banks      and Rural

Development