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.


Banking Quiz

Test your knowledge about topics related to banking

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What is the most common type of account for individuals to save money in a bank?

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What is a foreign exchange rate?

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What is the primary function of a commercial bank?

4 / 10

What is the name of the type of loan where a lender provides a lump sum of money to a borrower, to be repaid with interest over a set period of time?

5 / 10

What is a life insurance policy?

6 / 10

How many zeros are in one billion?

7 / 10

What is the full form of NPA?

8 / 10

What is the name of the type of loan where the borrower can use the loan proceeds for any purpose, without specifying the end use of the funds?

9 / 10

What is the payment method's name where a customer can make payments using their smartphone or computer?

10 / 10

What is the main purpose of money transfer?

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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.

Commercial Bank vs Cooperative Bank

The 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 vs Cooperative bank


Comparison Table

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.

commercial banks

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.

cooperative bank

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


  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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