They provide liquidity support and financial accommodation to the member societies down the chain. Large volume of funds in the form of governmental assistance under various welfare and subsidy schemes, grants and refinance from higher refinance agencies are channeled through state cooperative banks to the lower tier institutions.
Hence, it is the responsibility of the state cooperative banks to provide guidance and direction to the member societies and ensure that the valuable resources are not frittered away and diverted to investments in risky assets. Weaknesses in lower tier institutions would eventually move up the chain and bring down the entire edifice of the federal cooperative credit structure.