An Analysis of the Legal Framework of the Co-operative Banks in India

Co-operative banks are said to perform a broad and excellent role in the process of financial management which includes inculcating financial incorporation in India. Co-operative banks are considered as the monetary organization which provides financial support to the customers especially the people of low-class society who cannot take the opportunity of the high-class business banks for financial purposes. Co-operative banks provide loans especially to the poor people for the fulfillment of their means of livelihood. The cooperative banks in India are considered as the second-largest component among all the banking institutions in India. The co-operative banks provide loans of very low cost as it is their principle to work for cooperation rather than commercial parameters. Despite being categorized as one of the useful institutions of monetary nature it lays certain drawbacks that do not allow the institution to function smoothly. The cooperative banks have been working under the guidance of the Reserve Bank of India and its framework has been regulated by the Banking Regulation Act 1949. The co-operative banks are also under the dominance of the state government concerning the issues about the procedure for registration, membership, election, financial assistance, business operations, loans, recovery, and audit. All these important entities of cooperative banks are being regulated and supervised by the state government. In this research paper, the researcher will primarily focus on the working sector of the cooperative banks along with the history of its evolutions. The paper will also highlight the guidelines issued by the Reserve Bank of India and the Banking Regulations Act 1949. Also, some of the issues and challenges, and jurisdictional aspects faced by the bank are discussed in the paper