Cooperative Banks vs Public Sector Banks: Difference and Comparison

Before banks came into the picture, people used to save their money in underground lockers or with grains. At times, their money used to get stolen or eaten by rats. However, modern banking helped in resolving this issue.

Banks lend money and also help in the expansion of the economy. Loans help in lending capital to agriculture, education, small businesses, and service providers, and as a result, jobs and spending power are generated.

There are various types of banks, like, Cooperative Banks, Saving Banks, Utility Banks, Public Sector Banks, etc. These banks have their separate functions.

Key Takeaways

  1. Their members own and operate cooperative banks, while the government owns Public Sector Banks.
  2. Cooperative banks primarily lend to their members, while Public Sector Banks serve the general public.
  3. Cooperative banks are regulated by the Reserve Bank of India, while the Government of India and the Reserve Bank of India regulate Public Sector Banks.

Cooperative Banks vs Public Sector Banks

Cooperative banks are financial institutions owned and controlled by their members, through democratic governance. They offer a range of financial products and services, including savings and loan products, to their members. Public sector banks are owned and controlled by the government and are more significant and extensive in their operations.

Cooperative Banks vs Public Sector Banks
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Cooperative banks are institutions that their members own. This ensures that the customers of the bank are also its shareholders.

These institutions offer various standard banking and financial services. These banks are divided into two categories – rural and urban.

Small businesses depend on cooperative banks and account for 46% of net funding for rural businesses.

Public sector banks are owned 50% by the Government, for example, SBI. These banks are divided into two categories: Nationalised and non-Nationalised (State).

Public sector banks charge less for the services they provide to their customers than banks in the private sector.

Public sectors are open for government employees, providing their services regarding their salaries and fixed deposits. They even provide the employees with lockers.

Comparison Table

Parameters of comparison Cooperative Banks Public Sectors Banks 
Owned by These banks are owned by their customers. The Government partially owns these banks 
Charges The services are provided by helping each other, so it is non-profit. These banks charge less for their services compared to banks in the private sector. 
Services These banks provide fast and better services. These banks provide slow services compared to other banks. 
Loans These banks help businesses, companies, etc., by giving them loans. These banks help the agricultural sector more. 
Types Rural and Urban. Nationalised and State banks. 

What are Cooperative Banks?

Cooperative banks were built on the idea of no profit, no loss, as its name implies, and, therefore, do not pursue profitable projects or customers.

Their aim is mutual help and assistance. The Banking Regulations Act 1949 and the Cooperative Societies Act 1955 regulate these banks.

These banks have helped the rural population greatly by aiding them with loans and credits at low-interest rates compared to those who charged them locally (money lenders).

These banks have customers in every corner of the world and yet have managed to keep a personal relationship with them because of the nature of not looking for big profits and just helping each other out.

These banks have high-interest rates on deposits, whereas the interest rate on loans is low, and to reduce the risk of loss, they also encourage borrowing.

Farmers in rural areas have heavily and largely benefitted from these bank programs for Agricultural sectors, which enabled them to purchase the items they needed for farming, like seeds and fertilizers.

There are a lot of advantages of cooperative banks. However, there are a few drawbacks too.

These banks need investors to lend money to them, which can be challenging to find at times, and the number of past-due accounts has also been rising steadily over time.

In rural areas, wealthy landowners have reaped the advantages of cooperative banks rather than small industrialists who need financial help.

cooperative banks

What are Public Sector Banks?

A public sector bank is one in which the Indian Government owns most of the shares. It’s the same as having the Government-run the bank.

Since the public elects the Government’sGovernment’s representatives, banks that are wholly or partially owned by the 

The Government is referred to as a public sector bank.

Interest rates on loans are slightly lower in these banks; for example, SBI launched a home loan offering for its female customers with an interest rate of 8.35 per cent for a ticket size of up to Rs. 30 lakhs.

Fees and costs, such as balance management, are lower in public sector banks. 

Many public-sector banks are also expanding their service offerings.

Government workers open public sector accounts for their pensions, fixed deposits, lockers, and other purposes.

Their customer base is also relatively high compared to their private-sector counterparts since they have been in the industry for a long time and have earned customer confidence.

However, Public sector banks also have a few drawbacks. It lags in terms of financial results.

When most factors, such as nonperforming assets (NPA) and net interest margins, are compared, private sector banks perform much better.

Some public sector banks have recorded losses in the past few years.

public sector banks

Main Differences Between Cooperative Banks and Public Sector Banks 

  1. Cooperative banks are owned by their customers, whereas Public Sector Banks are owned mainly by the Government. 
  2. While cooperative banks are helpful to the general public in rural areas, public sector banks are helpful to the people, in general, all over the country. 
  3. Cooperative banks help farmers more, while Public Sector Banks help government employees more. 
  4. Cooperative banks help with the motive of uplifting poor sectors, whereas public sector banks are more profit-based banks. 
  5. Cooperative banks have slightly less transparency than public sector banks held accountable by the Government. 
Difference Between Cooperative Banks and Public Sector Banks
References
  1. https://www.researchgate.net/profile/Martin_Cihak3/publication/5125219_Cooperative_Banks_and_Financial_Stability/links/59dbbf4c0f7e9b1460fc262f/Cooperative-Banks-and-Financial-Stability.pdf
  2. https://www.sciencedirect.com/science/article/pii/S037722170200471X
  3. https://www.emerald.com/insight/content/doi/10.1108/17410401011006112/full/html
  4. https://onlinelibrary.wiley.com/doi/abs/10.1002/jid.947

Last Updated : 11 June, 2023

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