Bank of baroda

Cooperative Banks
Cooperative banks cater to the financing needs of agriculture, small industry and self-employed businessmen in urban
and semi-urban areas of India. The state land development banks and the primary land development banks provide long-
term credit for agriculture. In light of the liquidity and insolvency problems experienced by some cooperative banks in
fiscal 2001, RBI undertook several interim measures to address the issues, pending formal legislative changes, including
measures related to lending against shares, borrowings in the call market and term deposits placed with other urban
cooperative banks. RBI is currently responsible for the supervision and regulation of urban co-operative societies, the
National Bank for Agriculture and Rural Development, state co-operative banks and district central co-operative banks.
The Banking Regulation (Amendment) and Miscellaneous Provisions Act, 2004 (which came into effect as of September
24, 2004), specifies that all co-operative banks are under the supervision and regulation of RBI.
Term Lending Institutions
Term lending institutions were established to provide medium-term and long-term financial assistance to various industries
for setting up new projects and for the expansion and modernization of existing facilities. These institutions provide fund-
based and non-fund based assistance to industry in the form of loans, underwriting, direct subscription to shares,
debentures and guarantees. The primary long-term lending institutions include Industrial Development Bank of India
(converted into a banking company with effect from October 2004), IFCI Limited, Infrastructure Development Finance
Company Limited and Industrial Investment Bank of India.
The term lending institutions were expected to play a critical role in industrial growth in India and, accordingly, had
access to concessional government funding. However, in recent years, the operating environment of the term lending
institutions has changed substantially. Although the initial role of these institutions was largely limited to providing a
channel for government funding to industry, the reform process required them to expand the scope of their business
activities. Their new activities include:
Fee-based activities like investment banking and advisory services; and
Short-term lending activity including corporate loans and working capital loans.
Pursuant to the recommendations of the Committee on Banking Sector Reforms (Narasimham Committee II), S.H. Khan
Working Group, a working group created to harmonise the role and operations of term lending institutions and banks,
RBI, in its mid-term review of monetary and credit policy for fiscal 2000, announced that long-term lending institutions
would have the option of transforming themselves into banks subject to compliance with the prudential norms as applicable
to banks in India. In April 2001, RBI issued guidelines on several operational and regulatory issues which were required
to be addressed in evolving the path for transition of a term lending institution into a universal bank.
ICICI Limited had a reverse merger with its banking subsidiary effective from April 2002. Industrial Development Bank of
India was converted into a banking company with the name of Industrial Development Bank of India Limited within the
meaning of the Bank Regulation Act and the Companies Act with effect from October 2004.