Difference between Commercial Bank and Cooperative Bank

Banks are an essential part of any economy as they help fill the financial gap at various levels. It can be described as the financial institutions that borrow money from depositors on a fixed interest rate. They provide various services to their customers and charge a small fee. According to RBI’s official website, currently, there are 370 cooperative central banks, 31 state banks, and 81 commercial banks functional in India. All these banks implement Banking Regulation Act, 1949, and all banks are obliged to obey this act.

Many people consider commercial banks and cooperative banks similar, but both have different entities and purposes. Commercial banks are placed to run their financial activity for commercial purposes, and their primary aim is to earn profit from these financial and banking activities. On the other hand, Cooperative banks are formed to give farmers and SMEs financial support to help them meet their financial requirements. It can be unclear to understand; therefore, we will take a comprehensive look at the main difference between the commercial and cooperative banks.

Difference between Commercial Bank and Cooperative Bank

What are Commercial Banks?

Commercial banks represent the financial institution or company governed and regulated under Banking Regulation Act, 1949 and advised by RBI. It is free to serve their financial or banking services to individuals, businesses, and organizations for commercial purposes. Commercial banks can accept deposits from general people and grant them various types of loans for the short term and long term. These banks are also eligible to provide short, medium, and long-term loans or finance to the general public on a fixed interest. However, most banks prefer to provide short-term loan facilities to most people because it is less risky, and most people can easily use them. Here are services or the list of services offered by commercial banks to their customers. 

1. Its users or customers can open recurring, fixed, saving or current accounts to keep their money in the bank and get some benefits.

2. These banks offer personal, home, auto, and many other kinds of loans.

3. ATM services, Cheque, Debit, and Credit card facilities are also significant facilities.

4. Offer safeguards to the assets of their customer

5.  and security to their customer’s wealth.

6. Nowadays, commercial banks also provide online money transfer facilities, merchant banking, and trading financing facilities. 

What are Cooperative Banks?

Cooperative banks are also critical financial institutions. It is operated and owned by its members or the customers. These banks are registered under the Cooperative Society Act of 1965 and both the banking and cooperative legislation regulate such banks. NABARD and RBI also regulate cooperative banks. It is located in rural and urban places to help its members financially by offering credit. These banks also accept deposits from customers and grant loans with low-interest rates to members and non-members. In cooperative banks, the members and borrowers are the owners of the cooperative banks simultaneously. And their bank accepts deposits in savings, and current accounts provide security to the borrowed money and mortgage and locker facilities. 

Types of Cooperative Banks In India

There are mainly three types of cooperative banks in India, as listed below.

State Cooperative Banks

These banks are regulated at the state level and fill the gap between Primary credit society and central cooperative society. 

Primary Credit Society

These are very high in number and important as well to have to serve the customer. Generally, primary credit societies are located in the village and small towns to help members and non-members. These banks are significant as farmers, small businesses, and many other village people participate in banking activities to avail themselves of several privileges. 

Central Cooperative Banks

Central cooperative banks are operated at the district level, and they have people from that locality. These banks also provide loans and links between members and non-members. 

Key Things To Know About Cooperative Banks

Here are key terms that you must know about cooperative banks.

Its customers are allowed to join the membership for volunteer purposes.

Each member is responsible for acting in the bank’s economic activities.

The members are allowed to participate in various activities to educate, provide training, and inform others to get services from the banks without hoping to get benefits in return.

Now you have learned what commercial and cooperative banks are, so let’s know some of the significant differences between both. 

Difference between Commercial Bank and Cooperative Bank 

The significant difference between commercial banks and cooperative banks is that commercial banks generally offer their financial services to individuals and businesses through financial support. But the cooperative banks also offer financial help to the farmers and rural SMEs to let them be financially independent. 

Cooperative banks serve their members and non-members, but commercial banks only provide such services to serving individuals.

Commercial banks are larger in size and financial activities than cooperative banks, restricted to particular geographical locations.

In cooperative banks, the shareholders can also be the borrower, but the only account holder can be a borrower in commercial banks.

Comparison ParameterCommercial Banks Cooperative Banks
Registered Under Commercial banks are listed under Banking Regulation Act, 1949 Cooperative banks are governed under the Cooperative Society Act, 1965 
The Scale Of The Bank These banks are larger by revenue and profit base.However, the cooperative banks are small in size and by revenue. 
Rate Of Interest It offers lower interest rates to its customers compared to cooperative banksCooperative banks provide a higher rate of interest to their customers compared to commercial banks 
Goal Of Bank Mainly earn profit by providing financial servicesServe essential services to its customers located in rural and urban places. Their primary focus is to provide essential services to farmers and rural businesses.
Functional Area Accept deposits from depositors and provide loans to individuals and businesses. It also accepts deposits from members but mainly provides loans to farmers and small businesses.


Commercial banks are joint-stock or public and private banks regulated under the Banking Regulation Act, 1949. In contrast, cooperative banks are the banks that are regulated under the Cooperative Society Act, 1965. Commercial banks serve their services to individuals and businesses, but cooperative banks offer financial services to farmers and low-level businesses at a meager interest rate. So, I hope now you have understood the difference between commercial and cooperative banks. If you desire to keep reading about banking, investing, share market, and many other similar articles, stay tuned with The Finance Point.

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