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Cooperative Banks,Foreign Banks,Apex Bank,SIDBI, IFCI, NHB, NACH In Details

Cooperative Banks

Co-operative Banks are government supported financial agency in India, which are organized and managed with the dictum of co-operation, self-help and mutual help. It functions with the “no profit and no loss” model. As other banks in the country, Co-operative banks perform all the basic banking functions like borrowing and lending of credits.

In India, Co-operative Banks are working for nearly hundred years. Co-operative Banks are considered as one of the important financial institutions in the country. The major contributions of these banks are mostly in rural areas where they play the most vital role in rural financing and micro financing. The major strengths of co-operative banks are their easy local reach, transparent interaction with the customers and their efficient services to common people.


Objectives of Co-Operative Banks

  • Engage in rural financing and micro financing
  • Main objective is to remove the dominance of common man by the middle man and money lenders.
  • Ensure credit services to farmers at low rate of interest providing socio-economic condition to the people.
  • Provide financial support for the needy people and farmers in the rural areas
  • Provides personal finance services for those engaged in small-scale industries and self-employment driven activities for peoples in rural areas as well as in urban areas


Categories of Co-operative Banks

The need of Co-operative banks in India is much important to support the financial requirements of the people. To provide a much established support to every person in the country and for the development of the nation, Co-operative banks are categorized at various dimensions and at various levels.

The Co-operative Banks can be divided into two categories based on their functions. They are,

  • Long – Term Co-operative Credit Institutions
  • Short – Term Co-operative Credit Institutions

Long – Term Co-operative Credit Institutions functions and provide services at three levels:

  • State Level
  • District Level
  • Village Level

Short – Term Co-operative Credit Institutions are further divided into three sub-categories:

  • State Co-operative Banks
  • District Co-operative Banks
  • Primary Agricultural Co-operative Societies

Apart from these classifications, the co-operative banking structure in India is further divided into five main groups:

  • Primary Urban Co-operative Banks
  • Primary Agricultural Credit Societies
  • District Central Co-operative Banks
  • State Co-operative Banks
  • Land Development Banks


Functions of Co-operative Banks

  • The Cooperative Banks functions with the objective of fulfilling the credit requirements and needs of people living in the rural and urban areas.
  • Perform multiple activities and functions at large extent to carry out developments and regulation in the society that strengthen the co-operative movements.

Primary Urban Co-operative Banks (PUCBs):

The Urban Co-operative Banks are those that function in urban and semi-urban areas. Generally it is referred as Primary Co-operative Banks. The functions of PUCBs are:

  • Lending money to small borrowers and businesses
  • Provide working capital loans and term loans
  • Provide advances against shares and debentures

Primary Agricultural Credit Societies (PACS)

These institutions act as a core of Indian Co-operative movement. The main objectives of PACS are:

  • Raising the capital of the bank to provide loans and support for customers
  • Motivating the habit of savings amongst customers and collecting deposits
  • To provide services and inputs to people for their welfare and development
  • To support and motivate various income augmenting activities

District Central Co-operative Banks (DCCBs)

The Primary Agricultural Credit societies are affiliated to the DCCBs. The functions of DCCBs are:

  • Act as a support centre for district central financing agencies
  • Arranging credit to primaries
  • Managing banking business
  • Approve, supervise and control implementation of policies

State Co-operative Banks (SCBs)

The District Central Co-operative Banks are in turn affiliated to SCBs. The functions of SCBs are:

  • Serve as balancing centre in the States
  • Organise provision of credit for credit worthy farmers
  • Carry out banking business
  • Leader of the Co-operatives in the States

Land Development Banks (LDBs)

The LDBs are used to meet the needs of agricultural sector through long term credits. The LDBs functions at two levels. One is the Central LDBs operating at the state level and the other is Primary LDBs operating at district level or taluka level. The functions of LDBs are:

  • Provide services to meet the requirements for developing areas
  • Providing loans on the security of mortgages
  • Raising their resources by floating debentures in the market

Although, Co-operative banks mainly do business in the agriculture and rural areas, some groups like PUCBs, DCCBs and SCBs operate in semi-urban, urban and metropolitan areas also.


Products and Services

The Products offered by the Co-operative banks includes:


  • Savings Bank Account
  • Current Account
  • Recurring Deposit
  • Fixed Deposit
  • Cash Certificate


  • Loans to Salaried Employees
  • Home Need Loans
  • Loans to Pensioners
  • Loans under Women Entrepreneur Development Scheme
  • Building Mortgage Loan
  • Education Loan
  • Housing Loan
  • Loan to Physically Challenged Persons

The Services offered by the Co-operative banks includes:

  • Clearing
  • Safe Deposit Locker
  • Automated Teller Machine (ATM)
  •  Demand Draft / Pay Order



Co-operative Banks in India are registered under the Co-operative Societies Act and are regulated by Reserve Bank of India.


Foreign Banks

India is a vast country with a lot of trade opportunities. Banks had a major contribution in India’s growth. Foreign banks, speaking about them as a definition, they are banks from a foreign country working in India through branches. RBI has provided rules and guidelines for a foreign bank to establish and operate in India.

Eligibility Criteria – Foreign Banks in India

There is an eligibility criterion on the basis of capital for the foreign bank to work in India. They must have at least 5 billion rupees towards capital on establishment. Moreover they must also be ready to credit 18 % of net ANBC (‘adjusted net bank credit’ – which is total investment made by bank on non-governmental securities.) towards agricultural loans.

Modes of Operation

The banks can have two modes of operation in India. As mentioned above branch mode or Subsidiary mode which is known as WOS (Wholly owned Subsidiary).  They can either start the bank branches in the initial setup or later convert them to WOS. But to work as a WOS there are several factors to be met

  • Economic stability should be proved by the bank
  • Bank must have a very good financial soundness
  • The bank must provide necessary documents to show the proper ownership.
  • The bank must be rated by any International rating agency
  • Bank must have a risk management team.

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Apex Financial Bodies

RBI (Reserve Bank of India)-

  • RBI was established in April 1935 under Reserve Bank of India, 1934.
  • On the recommendation of Hilton-Young Commission.
  • Central Bank of India which was nationalized in 1949.
  • Central office initial was established in Calcutta and later moved to Mumbai in 1937.
  • Official Directors- Governors and not more than four deputy governors.
    Currently following persons are on following posts-
    Governor– Dr Urjit R. Patel
    Deputy Governor– (i) Shri S. S. Mundra (Retired on 30-07-2017) (ii) Shri N. S. Vishwanathan (iii) Dr Viral V. Acharya (iv) Shri B.P. Kanungo
  • RBI performs his function under the guidance of the Board of financial supervision.
    Board for Financial Supervision (BFS)-
    Constituted in November 1994.The Board is constituted by co-opting four Directors from the Central Board and is chaired by the Governor.
  • Important Acts Administered by RBI-
    (i) Reserve Bank of India Act, 1934
    (ii) Public Debt Act, 1944/Government Securities Act, 2006
    (iii) Government Securities Regulations, 2007
    (iv) Banking Regulation Act, 1949
    (v) Foreign Exchange Management Act, 1999
    (vi) Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002
    Other Relevant Acts-
    (i) Negotiable Instruments Act, 1881
    (ii) Companies Act, 1956/ Companies Act, 2013
    (iii) Deposit Insurance and Credit Guarantee Corporation Act, 1961
    (iv) Regional Rural Banks Act, 1976
    (v) National Bank for Agriculture and Rural Development Act, 1981
    (vi) National Housing Bank Act, 1987
    (vii) Competition Act, 2002
    (viii) Indian Coinage Act, 2011
  • RBI has 20 Regional offices and 11 Sub Offices
  • Following are the fully owned subsidiary of RBI-
    (i) Deposit Insurance and Credit Guarantee Corporation of India (DICGC)
    (ii) Bharatiya Reserve Bank Note Mudran Private Limited (BRBNMPL)
    (iii) National Housing Bank (NHB)
  • First governor of RBI- Sir Osborne Smith
    First governor of RBI after nationalization- C. D. Deshmukh
    First women Deputy Governor of RBI -K.J.Udeshi.
  • RBI Emblem: Tiger and Palm tree

SEBI (Securities and Exchange Board of India)-

  • Established in April 1992 under SEBI Act, 1992.
  • Regulator for the securities market in India.
  • Headquarters- Mumbai
  • Current Chairman- Ajay Tyagi
  • The Forwards Market Commission, the commodities market regulator, was merged with the Securities and Exchange Board of India in December 2015.

IRDAI (Insurance Regulatory and Development Authority of India)-

  • Apex Body in the insurance sector in India.
  • Based on Insurance Regulatory and Development Authority Act, 1999.
  • Established on the recommendation of Malhotra Committee report of 1994.
  • Headquarter- Hyderabad, Telangana
  • The Body consists of 10 members-
    (a) Chairman (b) Five full-time members (c) Four part-time members.
  • Current Chairman- T. S. Vijayan

NABARD (National Bank for Agriculture and Rural Development)-

  • Apex development financial institution in India.
  • Headquarter- Mumbai
  • Established in July 1982 under NABARD Act 1981.
  • On the recommendation of B. Sivaraman Committee.
  • Replaced the RBI’s Agriculture Credit Department and Rural Planning and Credit cell.
  • It is a specialised bank for Agriculture and rural development in India.
  • Rural Innovation Fund and Rural Infrastructure Development Fund have been set under NABARD.
  • Important Functions-
    (i) Recommends about licensing for RRBs and Cooperative banks to RBI.
    (ii) Refinances the financial institutions which finance the rural sector.
  • Current Chairman- Dr Harsh Kumar Bhanwala

SIDBI (Small Industries Development Bank of India)

  • Established in April 1990 under SIDBI Act, 1989.
  • Provide refinance facilities and short-term lending to industries and MSME’s.
  • Headquarter- Lucknow
  • Associates of SIDBI-
    (i) Credit Guarantee Fund Trust for Micro and Small Enterprises- provides guarantees to banks for collateral-free loans extended to SME.
    (ii) SIDBI Venture Capital Ltd
    (iii) SME Rating Agency of India Ltd. (SMERA)- Provides composite ratings to SME.
    (iv) ISARC – India SME Asset Reconstruction Company in 2009, as specialized entities for NPA resolution for SME.
  • MUDRA Bank is a subsidiary of SIDBI.

EXIM (Export–Import Bank of India)-

  • Premier export finance institution in India
  • Established in 1982 under EXIM Act 1981.
  • Headquarters- Mumbai
  • Managing Director- Shri David Rasquinha
  • It coordinates with the working of institutions engaged in financing export and import of goods and services.



Small Industries Development Bank of India (SIDBI), set up on April 2, 1990 under an Act of Indian Parliament, is the Principal Financial Institution for the Promotion, Financing and Development of the Micro, Small and Medium Enterprise (MSME) sector and for Co-ordination of the functions of the institutions engaged in similar activities.

Chairman & Managing Director – Dr. Kshatrapati Shivaji

Headquarter – Lucknow

It was initially carved out as a wholly owned subsidiary of Industrial Development Bank of India, presently the ownership is held by 34 Government of India owned / controlled institutions.

The authorized capital of SIDBI is ` 10 billion (€ 125 million) and paid up capital is ` 4.50 billion (€ 56.25 million). The net worth of SIDBI as on March 31, 2014 was ` 80 billion (€ 1 billion).

The presence of SIDBI is spread all over India with the following structure:

  • Head office at Lucknow
  • 15 Regional Offices
  • 84 Branches catering to 600 clusters across all the states

The business domain of SIDBI consists of Micro, Small and Medium Enterprises (MSMEs), which contribute significantly to the national economy in terms of production, employment and exports. MSME sector is an important pillar of Indian economy as it contributes greatly to the growth of Indian economy with a vast network of around 3 crore units, creating employment of about 7 crore, manufacturing more than 6,000 products, contributing about 45% to manufacturing output and about 40% of exports, directly and indirectly. In addition, SIDBI’s assistance also flows to the service sector including transport, health care, tourism sectors etc.


Associates of SIDBI

  • Credit Guarantee Fund Trust for Micro and Small Enterprises
  • India SME Technology Services Ltd.
  • SME Rating Agency of India Ltd.
  • India SME Asset Reconstruction Company Ltd.
  • Delhi Financial Corporation


Subsidiaries of SIDBI

  • SIDBI Venture Capital Limited
  • SIDBI Trustee Company Limited
  • MUDRA (SIDBI) Bank.

SIDBI is among the Top 30 Development Banks of the World. SIDBI retained its position in the top 30 Development Banks of the World in the ranking of The Banker, London. As per the May 2001 issue of The Banker London, SIDBI was ranked 25th both in terms of Capital and Assets.

SIDBI has initiated various schemes for upliftment of MSME sector and continues to be the prime lending institution for MSME sector. The necessity of continuously providing low cost credit to MSEs through concessional resource support to SIDBI has become more pronounced in the present scenario of recovery of the Indian economy from the economic slowdown.

Presently, the Bank provides refinance support through a network of eligible member lending institutions for onward lending to MSMEs and direct assistance is channelized through the Bank’s branch offices. SIDBI also extends financial assistance in the form of loans, grants, equity and quasi-equity to Non-Government Organizations / Micro Finance Institutions (MFIs) for on-lending to micro enterprises and economically weaker sections of the society, enabling them to take up income generating activities on a sustainable basis.

SIDBI also functions as a Nodal/ Implementing Agency to various ministries of Government of India viz., Ministry of MSME, Ministry of Textiles, Ministry of Commerce and Industry, Ministry of Food Processing and Industry, etc.


IFCI (Industrial Finance Corporation of India)

IFCI, previously Industrial Finance Corporation of India, is an Indian government owned development bank to cater to the long-term finance needs of the industrial sector. It was the first development finance institution established by the Indian government after independence.

Until the establishment of ICICI in 1991, IFCI remained solely responsible for implementation of the government’s industrial policy initiatives.

In 1993 it was reconstituted as a company to impart higher degree of operational flexibility. IFCI was allowed to access the capital markets directly.

The Industrial Development Bank of India, Scheduled banks, insurance companies, investment trusts and co-operative banks are the shareholders of IFCI. The Union Government has guaranteed the repayment of capital and the payment of a minimum annual dividend.

The corporation is authorised to issue bonds and debentures in the open market, to borrow foreign currency from the World Bank and other organisations, accept deposits from the public and also borrow from the Reserve Bank.

The authorised share capital of the IFCI was Rs. 10 crore at the initial stage, According to the Industrial Finance Corporation (Amendment) Act, 1986, the authorised capital of the corporation has been raised from Rs. 100 crore to Rs. 250 crore (the authorised capital may be fixed by the government of India by notification from time to time).


The functions of the IFCI base as follows:

(i) The corporation grants loans and advances to industrial concerns.

(ii) Granting of loans both in rupees and foreign currencies.

(iii) The corporation underwrites the issue of stocks, bonds, shares etc.

(iv) The corporation can grant loans only to public limited companies and co-operatives but not to private limited companies or partnership firms.

Organisation and Management:

The Head Office of the IFCI is in New Delhi. It has also established its Regional offices in Bombay, Chennai, Kolkata, Chandigarh, Hyderabad, Kanpur and Guwahati. The branch office of IFCI is located in Bhopal, Pune, Jaipur, Cochin, Bhubaneswar, Patna, Ahmedabad and Bangalore.

The IFCI is managed by a Board of Directors, headed by a Chairman, who is appointed by the Government of India, in consultation with RBI. The chairman holds his position for a period of 3 years, subject to extension.

Of the 12 directors, 4 are nominated by the IDBI, three of whom are experts in the fields of industry, labour and economics and the fourth is the General Manager of the IDBI. The remaining 8 directors are nominated.

Two directors are nominated for a term of 4 years by each of the following-scheduled banks, co-operative banks, insurance companies and investment companies making up eight directors.

Activities of the IFCI:

The promotional activities of IFCI are explained below:


1. Soft Loan Assistance:

This scheme provides soft loan assistance to existing industries in small and medium sector for developing technology through in-house research and development.


2. Entrepreneur Development:

IFCI provides financial support to EDPs (Entrepreneur Development Programmes) conducted by several agencies all-over India. In co-operation with Entrepreneurship Development Institute of India.


3. Industrial Development in Backward Areas:

IFCI also take measures to promote industrial development in backward areas through a scheme of concessional finance.


4. Subsidised Consultancy:

The IFCI gives subsidised consultancy for,

(i) Small Entrepreneurs for Meeting the Cost of Project.

(ii) Promoting Ancillary Industries

(iii) To do the Market Research.

(iv) Reviving Sick Units.

(v) Implementing Modernisation.

(vi) Controlling Pollution in Factories.


5. Management Development:

To improve the professional management the IFCI sponsored the Management Development Institute in 1973. It established the Development Banking Centre to develop managerial, manpower in industrial concern, commercial and development banks.

Working of the IFCI:

The working of the IFCI came in for a large measure of criticism. In the first place, the rate of interest which the corporation charged was extremely high. Secondly, there was a great delay in sanctioning loans and in making the amount of the loans available.

Thirdly, the ‘corporation’s insistence on the personal guarantee of managing directors in addition to the mortgage of property was considered wrong In the last two decades the corporation had entered into new lines of activity, viz, underwriting debentures and shares and guaranteeing of deferred payment in respect of imports from abroad of plant an equipment by industrial concerns and subscribing to stocks and shares of industrial concerns directly Besides, the performance of IFCI together with the work of other public sector financial institutions has been extremely credit worthy in the last two decades.


NHB (National Housing Bank)



The National Housing Bank (NHB) is an apex level financial institution catering to the housing sector in the country.
It was established on July 9, 1988.
It is a wholly owned subsidiary of Reserve Bank of India (RBI), was set up by an Act of Parliament in 1987.
NHB has been established with an objective to operate as a principal agency to promote housing finance institutions both at local and regional levels.

It is headquartered in New Delhi and has offices in all major cities.


 “To Promote inclusive expansion with stability in housing finance institutions”.


 To yoke and promote the market potentials to serve the housing needs of all segments of the population with the focus on low and moderate-income housing.


1. The main and furthermost objective of NHB is to provide financial support to the poorest segment of the country at reasonable price.
2. To promote a chain of dedicated housing finance institutions to sufficiently serve various regions and different income groups.
3. To increase resources for the sector and channelise them for housing.
4. To make housing loan more affordable to the poorest section of the society.
5. To manage and supervise the day-to-day activities of housing finance companies.
6. To encourage augmentation of supply of buildable land and also construction materials for housing and to enhance the housing stock in the country.
7. To encourage public agencies to emerge as facilitators and suppliers of serviced land, for housing.

Main Functions

1. To promote housing finance institutions at both regional and local levels.

2. To regulate all the housing finance institutions for smooth and proper functioning.

3. As an apex institution, It can provide financial support to housing finance institutions whenever they needed.

Board of Directors

1. Shri Sriram Kalyanaraman

Managing Director & Chief Executive Officer
2. Shri R. Gandhi
Deputy Governor, Reserve Bank of India
3. Shri Pankaj Jain, IAS,
Joint Secretary to the Government of India, Ministry of Finance
4. Shri Rajiv Ranjan Mishra, IAS,
Joint Secretary to the Government of India, Ministry of Housing and Urban Poverty Alleviation
5. Shri Malay Shrivastava, IAS
Principal Secretary,
Urban Development and Environment Department,
Government of Madhya Pradesh
6. Shri Sadakant, IAS
Principal Secretary,
Housing and Urban Planning Department,
Government of Uttar Pradesh.

NHB has 9 departments

1. NHB Residex Cell,
2. Regulation and Supervision,
3. Refinancing operations,
4. Direct finance operations,
5. Enabling processes,
6. Information Technology,
7. Resource mobilisation and management,
8. Development and risk management and
9. Board and CMD secretariat.

Quick Facts

Name of Apex institution  
National Housing Bank(NHB)
Established on
July 9, 1988
New Delhi
Committee established for its establishment
   C. Rangarajan
   MD and CEO
Shri Sriram Kalyanaraman
Official website


National Automated Clearing House (NACH)


The national payments corporation of India (NPCI) implemented National Automated Clearing House (NACH) to overcome the barriers set up by Electronic Clearing Service (ECS) systems set up RBI. NACH aims to create a better option for facilitating clearing services than the ECS system. ECS is replaced by NACH from 1st May 2016. All the banks under ECS have to switch to NACH within their validity period.
It is an electronic payment service for Banks, Financial Institutions, Corporate and Government to facilitate interbank, high volume, electronic transactions which are repetitive and periodic in nature thereby removing any geographical barriers within the country while making payments.
NACH provides a single set of rules for electronic transactions which are common across all the Participants, Service Providers and Users.

NACH System can be used for:


  • making bulk transactions towards distribution of payments such as subsidies, dividends, interest, salary, pension
  • making bulk transactions towards collection of payments such as telephone, electricity, water, loans, investments in mutual funds, insurance premium etc.

NACH aids government through its Aadhar Payment Bridge (APB) system by enabling Government Agencies to transfer subsidies and other benefits directly to the intended beneficiary using an Aadhar numbers by liking Government departments and their sponsor banks on one side and beneficiary banks and beneficiary on the other hand.

Type of transactions:

NACH is majorly used for making high volume, low value debit/credit transactions that are repetitive in nature. Like ECS, NACH supports two types of transactions.
Direct Credit involving distribution of salary, pensions, dividends, interest, etc to the relevant stakeholders at set frequency and periods and
Direct Debit involving regular fixed payments towards insurance premiums, loan repayments, recurring deposits, etc.

Benefits of using NACH:


  • NACH provides simplifying the mandates, reduction of activation time thereby reducing the cost of operation.
  • NACH helps avoid processing charges of paper based transactions such as cheques, which can provide significant cost savings to Banks and Financial Institutions as all credits and debits are done electronically.
  • Organisations can take advantage of automatic crediting of allowance benefits or scholarships, timely dispersal of salaries, pensions etc. thereby providing better customer service.
  • Customers can make payment of bills, instalments, premiums without missing the due dates by adding specified monthly dates.
  • NACH avoids high interchange fees of the credit card companies by charging a nominal fee.
  • Member banks can create their own solutions and products to address specific corporate and user needs for mandate management, thus ensuring greater efficiency in customer service through a superior mandate management system (MMS).
  • This system eliminates the regional and geographical barriers unlike ECS and facilitates same day transactions anywhere in India.


Difference between NACH and ECS:


  • The process of activation of ECS mandates had a longer turnaround time of 30 days while it is expected to be 10 days in NACH.
  •  NACH provides same day presentation and settlement, including returns processing while in case of ECS it is spread over 3-4 days.
  • NACH has a well defined Dispute Management System (DMS); electronic platform to raise and resolve issues with a dispute reference number. In case of ECS; Dispute management is left to the prudence of the Destination Bank.
  • ECS has regional and geographical barriers, while NACH doesn’t have any.
  •  ECS is implemented by RBI while NACH is under NPCI


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