Difference Between Cooperative and Public Sector Banks

Difference Between Cooperative and Public Sector Banks

People used to save their money in lockers, underground, or with grains before banks came along. Their money was sometimes stolen or eaten by rats. Modern banking, on the other hand, aided in the resolution of this problem.

Banks lend money and contribute to the growth of the economy. Loans assist in the lending of funds to agriculture, education, small enterprises, and service providers, resulting in the creation of jobs and spending power. Cooperative banks, savings banks, utility banks, public sector banks, and other types of banks exist. Each of these banks serves a distinct purpose.

Cooperative Banks Vs. Public Sector Banks

The difference between Cooperative Banks and Public Sector Banks is that, whereas Public Sector Banks lend to businesses and corporations, Cooperative Banks primarily assist farmers with loans. Andhra Pradesh State Co-operative Bank Ltd, The Bihar State Co-operative Bank Ltd, and others are examples of cooperative banks, whereas public sector banks include Bank of Baroda, Bank of India, Bank of Maharashtra, and others.

Banks that are owned by their members are known as cooperative banks. This ensures that the bank’s customers are also shareholders. These organisations provide a wide range of standard banking and financial services. There are two types of banks in this category: rural and urban. Small enterprises rely on cooperative banks for 46 percent of their net funding in rural areas.

SBI, for example, is a public sector bank that is 50% controlled by the government. Nationalised banks and non-Nationalised banks are the two types of banks available (State banks). When compared to private sector banks, public sector banks typically charge less for the services they give to their customers. Generally, public sectors are open to government personnel, providing them with services such as salary and fixed deposits. They even provide lockers for the employees.

What are Cooperative Banks, and how do they work?

Cooperative banks, as their name implies, were founded on the principle of “no profit, no loss,” and hence do not pursue profitable projects or customers. Their goal is to aid and help each other. These banks are governed by the Banking Regulations Act of 1949 and the Cooperative Societies Act of 1955.

These banks have aided the rural populace greatly by providing loans and credits at lower interest rates than those offered locally (money lenders). These banks have customers from all over the world and have managed to maintain personal relationships with them due to their nature of not seeking large profits and instead of assisting one another.

These banks offer a high-interest rate on deposits but a low-interest rate on loans, and they encourage borrowing to minimise the risk of loss. Farmers in rural areas have benefited greatly from these agricultural bank programmes, which have allowed them to acquire commodities like seeds and fertilizers that they require for farming.

Cooperative banks have a number of advantages. There are, however, some disadvantages. These banks require investors to lend them money, which can be difficult to come by at times, and the number of past-due accounts has continuously risen over time. Rich landowners have reaped the benefits of cooperative banks in rural areas, rather than small industrialists who want financial assistance.

What are Public Sector Banks, and what do they do?

The Indian government holds the majority of the shares in a public sector bank. It’s the same as having the bank run by the government. Because the public elects the government’s representatives, banks that are totally or partially controlled by the government have an advantage.

Public sector banks are referred to as the government.

These banks’ loan interest rates are slightly lower; for example, SBI recently offered a house loan offering for its female customers with an interest rate of 8.35 percent for a ticket size of up to Rs. 30 lakhs. In public sector banks, fees and costs, such as balance management, are lower.

Many public-sector banks are also adding new services to their portfolios.

For their pensions, fixed deposits, lockers, and other needs, government employees frequently open public sector accounts. Because they have been in the industry for a long time and have established customer trust, their client base is likewise rather large when compared to their private-sector peers.

However, there are a few disadvantages to public sector banks. In terms of financial results, it trails behind. When most metrics are evaluated, such as nonperforming assets (NPA) and net interest margins, private sector banks appear to outperform public sector banks. In recent years, some public sector banks have also suffered losses.

Difference Between Cooperative and Public Sector Banks

  • Customers own cooperative banks, whereas the government owns the majority of public sector banks.
  • While cooperative banks serve the general public in rural areas, public sector banks serve the general public throughout the country.
  • Farmers benefit more from cooperative banks, whereas government employees benefit more from public sector banks.
  • Cooperative banks aid in the upliftment of the poor, whereas public sector banks are more profit-driven.
  • Cooperative banks are less transparent than public sector banks, which are held to a higher standard by the government.


Despite the fact that cooperative banks were established to aid one another, they lack transparency and services. The RBI must ensure that cooperative banks are run with transparency and honesty and that they assist in the upliftment of the disadvantaged. Rich landowners usually make use of all the perks afforded by cooperative banks, which is unequal.

Because the government owns public sector banks, it frequently injects new capital into them, allowing them to flourish. People come from all across the country to use these banks for loans and to store their money in the lockers. Public sector banks also offer a variety of initiatives to assist their customers, and their fees are typically lower than those charged by private sector banks such as ICICI or HDFC. Their performance and services, on the other hand, are slow and low-quality.

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