When small co-operative societies were formed in rural areas long long ago , they became successful and co-operative movement in the country progressed step by step. These co-operative societies, mostly formed on community basis , were mainly artisan co-operative societies ,service co-operative societies ,cottage industry co-operative societies, handloom handicraft societies, marketing co-operative societies ,etc. All these co-operative societies needed finance from outside beyond the share capital raised by them. Therefore co-operative societies on community basis were formed on community basis to meet the credit needs of the community members in the rural areas. This was the beginning of the co-operative credit movement in rural areas. This happened about a century back in our country. These rural credit co-operative societies were the forerunners of the present day rural co-operative banks.
Many of these credit societies expanded their activities, accepting deposits from outside the co-operative society members and termed themselves as Banks. This transformation of the Rural credit societies into Rural co-operative banks took place gradually till the Banking Regulation Act was amended in 1966 bringing all rural co-operative banks under the purview of this Act imposing certain conditions.