Co-operative banks, an offshoot of the co-operative movement have expanded by leaps and bounds over the last decade. However, the regulatory environment and the other systemic controls are yet to be put in place thus leaving them as a vulnerable point in the financial system. They seem to be a dark spot that could be exploited with little difficulty.

A walk down the streets of Hyderabad, Ahmedabad and Mumbai would be enough to know how widely co-operative banks have spread their tentacles across the nation. Every nook and corner would display the hoarding of the office of one or the other co-operative bank. This wide-spread presence is due to the attitude of RBI and state authorities which believed that co-operative banks would act as vehicles of micro-credit dispensation besides encouraging the habit of saving among the lower and the middle income group. Besides that it also indicates that the entry barriers are low.

India is a vast country and the banking needs of the masses could not be adequately met through the public and private sector banks. A need to fill the gap was felt and co-operative banks were thought of as the optimum choice for this. Co-operative banks are usually promoted by a group of individuals in order to cater to the needs of the members themselves. Thus, the members own a co-operative bank. In order to borrow funds from the bank one has to be the shareholder of the bank. In fact, one co-operative bank based at Hyderabad gives one share to each person who opens an account in the bank. The focus is limited to the local area of operations. Their major sources of funds are the funds raised from their members. The disbursement of the funds also is limited to the members of the co-operative society.

cooperative, banking, authorities, barriers, financial, income, regulatory, saving, sector, shareholder, disbursement, exploited, vulnerable, tentacles, microcredit