LEGAL FRAMEWORK AND CHALLENGES OF COOPERATIVE BANKING IN INDIA

AUTHOR – RADHIKA, LLM STUDENT AT SANT BABA BHAG SINGH UNIVERSITY VILLAGE KHIALA PADHIANA DIST JALANDHAR

BEST CITATION – RADHIKA, LEGAL FRAMEWORK AND CHALLENGES OF COOPERATIVE BANKING IN INDIA, INDIAN JOURNAL OF LEGAL REVIEW (IJLR), 6 (8) OF 2026, PG. 434-438, APIS – 3920 – 0001 & ISSN – 2583-2344.

Abstract

Cooperative banking in India occupies an important place in the country’s financial system, particularly in rural and semi-urban areas. Cooperative banks function on the principles of mutual assistance, democratic management, and financial inclusion. These institutions play a significant role in providing affordable credit to farmers, small traders, artisans, and weaker sections of society. The legal framework governing cooperative banks in India is complex because cooperative banks are regulated by both banking laws and cooperative society laws. The Reserve Bank of India (RBI), National Bank for Agriculture and Rural Development (NABARD), state governments, and Registrars of Cooperative Societies jointly supervise cooperative banks. Despite their contribution to rural development and financial inclusion, cooperative banks face several legal and operational challenges such as dual regulation, political interference, weak governance, corruption, financial instability, and rising non-performing assets (NPAs). This research paper examines the legal framework governing cooperative banks in India and analyses the major challenges faced by the sector.