Difference Between Commercial Bank and Cooperative Bank

Financial institutions that can offer money whenever a buyer or a seller needs, based on certain rules and regulations are called Banks. It acts as a bridge between borrowers, depositors and the customer. Banks have different standard operating procedures and every bank has a set of rules and regulations. Based on that, the categories are divided into 4.

Category 1 belongs to Commercial banks, category 2 belongs to Co-operative banks, and Category 3 belongs to Regional Rural Banks and the last category belongs to payments bank (this was recently approved by Reserve Bank of India.

Banks work by paying their customers to give them money. A person deposits money into the respective bank account and the same amount will be given to the other customers. The customer who has deposited the money in the bank will get a small amount of money as savings (interest) and the lender pays a large portion of money in return as loan. The difference in money will be with the bank.

Commercial Bank vs Cooperative Bank

The main difference between Commercial Bank and Co-operative Bank is the base of standard operating procedures. Commercial Bank offers services to individuals and businesses while cooperative banks offer finance to agriculturists and rural industries.

Commercial Bank vs Cooperative Bank


Comparison Table Between Commercial Bank and Cooperative Bank (in Tabular Form)

Parameter of ComparisonCommercial BankCo-operative Bank
Target CustomersGeneral Public and Business owners are the target customers.It mainly supports the agriculturists and also helps rural industries with financial help.
Governing ActBanking Regulation Act, 1949Cooperative Societies Act, 1965
Area and motive of operationOperates on a large scale with profit as the baseOperates on a small scale with service as the base.
BorrowersAccount-holders are the borrowersMember shareholders are the borrowers
The interest rate on depositsIt is less compared to the cooperative banksIt is higher compared to commercial banks.


What is Commercial Bank?

The commercial bank normally refers to a banking company that is established with the purpose to serve individuals, small and large scale organizations and business.

These banks accept the money from the customers and save the same money for a certain period and make good money out of it and lend the other customers the same money as the credit or loan.

These banks usually have three different schemes to attract the customer and let them know the reaps out of three schemes that will suit them and the usage policy of the customer.

Scheme 1 assigns a customer to a short term plan and Scheme 2 is assigned to a customer of medium termed plan and last scheme would go to long term plan and the names are assigned as RD’s, SD’s and others.

Most of the banks prefer assigning customers a short-term plan since the deposits are easy and returns are also on the lesser note.

These banks even provide the customers, credit card and debit card facility too to ensure the process is smooth and multiple loans will be sanctioned. The trade finance facility is also given to the customers.


What is Cooperative Bank?

It is a financial entity that belongs to its members or customers. These banks are usually formed by persons belonging to the same local or professional community or sharing a common interest.

They also provide a wide range of banking and financial services to their members. These banks are formed by the people who come together to jointly serve their common interest often from a cooperative society under the act of the government, when the society engages itself in banking business it is called a bank.

This bank has to obtain a license from the Reserve Bank of India before starting the business.

There are three different types of cooperative banks,

  1. Primary credit society: These are formed at the village or town level with the borrower and non-borrower members staying at a place or locality
  2. Central Co-operative banks: These banks operate at district level having the primary people at a locality and they even provide loans to their members and acts as a link between both of them.
  3. State Co-operative Banks: These banks serve as a link between the central and the primary credit society.

Most of their operations are restricted to a particular place or a particular district and in a local area depending on the society.

There are certain principles of the Co-operative bank that all the members should follow, the customers are allowed to be volunteers in joining and the membership is open for all the volunteers. Every member should participate in all the economic activities. They should participate in all the education, training and information activities without hoping that they might get something in return.

Main Differences Between Commercial Bank and Cooperative Bank

  1. The main difference between Commercial Bank and Co-operative Bank is the mode of operation and the service process, the commercial bank serves the individuals and the businesses by offering financial support while cooperative banks also offer financial help but to the rural industries as well as the farmers.
  2. Commercial banks limit themselves only in serving individuals but Co-operative banks serve from A to Z customers.
  3. Commercial banks operate on a larger scale to make good profits but Co-operative banks do the same job as service and they work on a smaller scale.
  4. Commercial banks follow no restriction policy for location but Co-operative banks have their restrictions towards location and type of business.
  5. Account-holders are the only borrowers in Commercial bank but Co-operative banks focus on Shareholders



There are some banks to take deposits from the customers and lending loans to the public and those are called Commercial banks. Cooperative banks are set up for a different purpose altogether, they are mainly established to provide financial help to business owners and farmers at a less rate of interest.

They both work on the policy of serving their customers that might to confined to a particular place or divided as per the locations but the only point of business is wither making money out of the business or serving people.

The commercial bank customers don’t have the power of vote that decides the credit rules but Co-operative banks do have.


  1. https://www.ceeol.com/search/article-detail?id=79198
  2. https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1536-7150.1975.tb01190.x
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