Who regulates cooperative credit society in India?

In India, the regulation of cooperative credit societies operates under a unique dual control system, involving both the State Governments and the Reserve Bank of India (RBI), with additional supervision from the National Bank for Agricultural and Rural Development (NABARD) for certain types of cooperative banks.

Understanding the Regulatory Landscape

Cooperative credit societies in India encompass a wide range of institutions, from small, local Primary Agricultural Credit Societies (PACS) to larger State Cooperative Banks and Urban Cooperative Banks. Their regulation depends largely on their size, scope of operations, and whether they accept deposits from the public, which brings them under the purview of banking regulations.

Key Regulators and Their Roles

1. State Governments (Registrar of Cooperative Societies - RCS)

   • Governance and Administration: Cooperative societies, including credit societies, are primarily governed by the respective State Cooperative Societies Acts. Each state has its own act.
   • Scope of Control: The Registrar of Cooperative Societies (RCS) in each state is responsible for:
     • Registration and de-registration of cooperative societies.
     • Overseeing their internal management, elections, and general administration.
     • Ensuring compliance with cooperative principles.
   • Example: State Cooperative Banks, for instance, are governed under the provisions of their concerned State Cooperative Societies Act.

2. Reserve Bank of India (RBI)

   • Banking Regulation: The RBI is the central banking institution and plays a crucial role in regulating cooperative credit societies that function as banks. Its primary focus is on the banking operations, financial stability, and protection of depositors' interests.
   • Legal Framework: The RBI regulates these cooperative banks under the provisions of the Banking Regulation Act, 1949 (specifically Part V, which applies to cooperative banks).
   • Scope of Control: The RBI's regulatory powers include:
     • Issuance of licenses for banking operations.
     • Prescribing capital adequacy norms, liquidity requirements, and prudential norms.
     • Conducting inspections and audits of cooperative banks.
     • Overseeing loan policies and risk management.
   • Example: State Cooperative Banks are regulated under the provisions of the BR Act, 1949, by the RBI. This also extends to Urban Cooperative Banks (UCBs) and District Central Cooperative Banks (DCCBs) which perform banking functions.

3. National Bank for Agricultural and Rural Development (NABARD)

   • Supervision and Development: NABARD is an apex development financial institution that supervises regional rural banks and cooperative banks, particularly those involved in agricultural and rural development.
   • Role: NABARD's role primarily involves:
     • On-site and off-site supervision of State Cooperative Banks (StCBs) and District Central Cooperative Banks (DCCBs).
     • Providing refinance facilities to these banks for lending to the agricultural and rural sectors.
     • Capacity building and developmental support.
   • Example: State Cooperative Banks are supervised by NABARD.

Table: Regulatory Bodies and Their Responsibilities

This multi-tiered regulatory framework aims to ensure the smooth functioning of cooperative credit societies, protect depositors' interests, and promote financial inclusion across India.