Limited access to technology is major challenge for cooperative banks: NAFCUB president Mehta

Jyotindra M. Mehta, President of the National Federation of Urban Cooperative Banks and Credit Societies Ltd. (NAFCUB)

In an exclusive interview with Moneycontrol,  Jyotindra M. Mehta, president, National Federation of Urban Cooperative Banks and Credit Societies Ltd (NAFCUB), said that limited access to technology is the principal hurdle for cooperative banks.

"The biggest challenge with cooperative banks today is limited access to technology. More than 50 percent of banks are unit banks, so they are very small in nature. So they can't buy technology," said Mehta.

Unit banks are single lenders providing financial services in the immediate area they are in, with no branches.

Mehta added that they are working to create an umbrella organisation of such banks.

In February 2021, an expert committee on urban cooperative banks (UCBs) was set up by the Reserve Bank of India under the chairmanship of former RBI deputy governor NS Vishwanathan.

The idea for an umbrella organisation was first mooted in 2006. The committee believed such a body would be a game changer and that NAFCUB should expedite the process of setting it up.

According to the committee, the umbrella organisation should be financially strong and well-governed by a professional board and senior management. The panel also suggested that it should provide cross-liquidity and capital support to UCBs when needed, apart from cloud services for facilitating IT-enabled operations by member banks.

The committee said, “Since aggregation of IT services will be a financial inclusion enabler and can also contribute to system-stability through standardisation of the IT interface, there is justification for RBI’s financial support to the UO.”

"Now the RBI has given regulatory sanction that you create an umbrella organisation and we're working on it," Mehta told Moneycontrol.

Doubling business in next five year

The NAFCUB president added that they are focusing on expanding UCBs’ business. "We are advocating to double the businesses of cooperative banks in five years, "he said.

On October 12, Union Home Minister Amit Shah, who also handles the portfolio of cooperation, pushed cooperative banks for 100 percent growth in deposits in the next five years.

"We are required to double our deposits in the next five years from Rs 5.5 lakh crore to Rs 11 lakh crore. A professional assessment is to be made for future expansion," Shah told bank chiefs at the NAFCUB at an annual meeting, in New Delhi.