The origins of the urban co-operative banking movement in India can be traced to the close of nineteenth century. These co-operative societies are based on the principles of co-operation, mutual help, cooperative decision making and open membership.

The term co-operative Banks, though non-formally defined, refers to primary co-operative banks located in urban and semi-urban areas. These banks till 1996, were allowed to lend money only for non-agricultural purposes.

Co-operatives represented a new and alternative approach to organization as against proprietary firms, partnership firms and joint stock companies which represent the dominant forms of commercial organization.

Co-operative organizations have developed in full swing in India, especially in Gujarat. Initially the Urban Co-operative Bank was established just to provide financial support to small scale home-industries. The Co-operative nature, culture and spirit of Gujaratians have been responsible for this status. They function with the rule of “one member, one vote” function on “no  profit  no  loss” basis.

The Researcher has tried to explain the overall financial strength of Co-operative Banks by differentiating the ratio. The profitability Ratio of these banks are (1) Operating Profit Margin Ratio (2) Cost of External Funds Ratio (3) Interest Earned to Total Funds Ratio (4) Interest Paid to Total Funds Ratio (5) Return on Total Funds Ratio (6) Net Profit to Total Assets Ratio and Leverage/Capital Structure ratio of these banks are (1) Deft. Equity Ratio (2) Dividend Coverage Ratio.

 He has also compared the financial strength of Varachha Bank with other five Co-operative Banks. Important recommendations and challenges faced by these Co-operative Banks are also discussed at the end of  the  research  paper.