In a groundbreaking move, the National Urban Cooperative Finance & Development Corporation (NUCFDC), which was recently launched by Union Home and Cooperation Minister Amit Shah, is set to revolutionize the landscape for urban cooperative banks (UCBs) in India.
The establishment of NUCFDC as a non-deposit-taking NBFC and a self-regulatory organisation for the urban cooperative banking sector marks a significant step towards enhancing the efficiency of UCBs, bringing them under a single self-regulatory umbrella for streamlined operations.
The NUCFDC, governed by a board comprising independent directors, is poised to become the much-anticipated self-regulatory body for approximately 1,500 UCBs. Its primary objective is to serve as a one-stop solution, facilitating the transition of all member banks onto a unified core banking platform, effectively acting as their quasi-regulator.
NUCFDC aims to raise Rs. 100 crore in its first equity round, out of the mandated Rs. 300 crore. This initial capital will fund the NUCFDC secretariat and the development of a robust technology stack. The innovative approach involves voluntary capital subscription by UCBs, highlighting a cooperative effort to fortify the sector.
NCDC (National Cooperative Development Corporation), Saraswat Cooperative Bank, TJSB Cooperative Bank, SVC Cooperative Bank and Kalupur Commercial Cooperative Bank are five key shareholders of NUCFDC. NCDC has already committed Rs 200 crore in the paid up capital of the umbrella body.
In 2020, the National Federation of Urban Cooperative Banks and Credit Societies (NAFCUB), the apex promotional body for Urban Cooperative Banks (UCBs) and credit societies, established the National Urban Cooperative Finance & Development Corporation (NUCFDC). This strategic move aimed to spearhead the nation’s most extensive financial inclusion initiative by digitally transforming over 1,500 UCBs. With a collective network boasting over 11,000 branches, these UCBs collectively serve a customer base exceeding 50 million individuals.
Once operational, NUCFDC plans to generate revenue through fees for core banking platform usage and an annual membership fee based on each member’s size. With over 100 UCBs, including major players like Saraswat Cooperative Bank, Cosmos Cooperative Bank, Kalupur Commercial Cooperative Bank, Janata Sahakari Bank, Surat Peoples Cooperative Bank, Rajkot Nagarik Sahakari Bank and Mehsana Urban Cooperative Bank among others already on-board, the NUCFDC is poised to become the largest digital transformation initiative for cooperative banks in the country.
The strategic move towards a single technology stack aligns with the NUCFDC’s vision of offering UCBs top-tier banking and non-banking products. The establishment of shared service centers aims to foster financial inclusion, transparency, corporate governance, and attract a younger clientele to the UCB sector.
Jyotindra Mehta, Chairman of NUCFDC and NAFCUB, emphasizes that the active participation of major UCBs signals a commitment to the cooperative movement and collaboration within the sector. The NUCFDC, a result of collaborative efforts between NAFCUB and the Reserve Bank, is poised to stand for transparent and secure banking services, strengthening the UCB sector and equipping them with the necessary tools to serve their 50 million-plus customers effectively.
Urban Cooperative Landscape in India:
| No. of UCBs: | 1,544 |
| No. of Branches: | Over 11,000 |
| No. of Customers: | Over 50 million |
| Total deposits: | USD 49.6 billion |
| No. of Multi State UCBs | 54 |
| No. of Single State UCBs | 34 |
| No. of Non-scheduled UCBs | 20 |
The NUCFDC’s aggregation of UCBs onto a unified digital platform addresses the existing challenge, where 90% of UCBs lack RBI approval for digital banking due to inadequate IT systems and security. This initiative allows customers to access digital banking platforms and a diverse range of banking products, even if their primary UCB does not provide them.
Moreover, the umbrella organization enables UCBs to access cheaper sources of funds, foreign exchange, and niche products such as credit cards, bancassurance, wealth management services, and MSME-focused trade finance. With 1,544 scheduled UCBs across the country, this transformative initiative is set to create a common platform, providing smaller UCBs with the benefits of scale, cross liquidity, capital support, stability, and regulatory comfort.
In the eyes of industry leaders like Gautam Thakur of Saraswat Cooperative Bank and Milind Kale of Cosmos Cooperative Bank, the NUCFDC represents a long-term solution to enhance UCBs’ operational and financial health, fostering resilience in the face of evolving banking environments and instilling confidence in the sector.
