Context: Recently, the Union Home Minister and Minister of Cooperation inaugurated the National Urban Cooperative Finance and Development Corporation Limited, an umbrella organisation for urban cooperative banks.

Key details

• After 20 years of struggle, NUCFDC has been established, which was a necessity of time and marks a new beginning for self-regulation.

• The inauguration of the National Urban Cooperative Finance and Development Corporation Limited underlines the government’s commitment to the growth and stability of Urban Cooperative Banks. This umbrella organization aims to facilitate self-regulation, compliance with banking regulations, and expansion of UCBs across India.

• With a strong collective presence and improved asset quality, UCBs are poised for enhanced development and greater financial inclusion under this initiative.

Need for Umbrella Organization for UCBs

• Make the UCB sector financially resilient by helping UCBs raise capital, be a provider of liquidity to address mismatches in emergencies and crisis.

• Enhance depositor’s confidence

• Extend liquidity and capital support to member UCBs

• Establish IT infrastructure for shared use of members enabling smaller UCBs to widen their range of services at relatively low cost.

• Offer fund management and other consultancy services.

• Umbrella Organization can in the long run develop into a Self-Regulatory Organization for its members.

Structure of Proposed Umbrella Organization

• Existing UCBs can subscribe to the capital of Umbrella Organization for acquiring its membership on a voluntary basis.

• The company will largely be owned and controlled by UCBs as shareholders.

• Also raise capital from the market.

• It will be in the form of non-deposit accepting NBFC.

About National Urban Cooperative Finance and Development Corporation Limited (NUCFDC)

• Umbrella Body: Established as an umbrella organization for Urban Cooperative Banks (UCBs) in India.

• Mission: Aligned with the goal of ‘Sahakar se Samriddhi’ (prosperity through cooperatives) to promote self-reliance and economic growth.

• Objective: To modernize and strengthen the Urban Cooperative Banking Sector.

• Function as SRO: NUCFDC will serve as a Self-Regulatory Organization(SRO) for the UCB sector, ensuring compliance and efficient operations.

• Specialized Functions: The corporation will provide specialized functions and services tailored to the needs of cooperative banks.

• Facilitate Communication: It aims to facilitate communication between UCBs and regulatory bodies, addressing challenges faced by the sector.

• Certification: Registered by the Reserve Bank of India (RBI) as a Non-Banking Finance Company (NBFC) under a Certificate of Registration (CoR).

• The umbrella organization aims to enhance self-regulation and boost the development of Urban Cooperative Banks (UCBs) in India.

• The major role for the umbrella organisation is to prepare small banks for compliance with the Banking Regulation Act. 

• Compliance: The organization will help prepare small banks for compliance with the Banking Regulation Act. The goal is to establish urban cooperative banks in every city, promoting financial inclusion and accessibility.

Collective Strength

• Branches: 11,000 branches collectively.

• Banks: 1,500 member banks.

• Deposits: Rs 5 lakh crore.

• Loans: Rs 3.50 lakh crore.

Performance

• Net NPAs: Reduced to 2.10%, reflecting improved asset quality.

• The organisation will boost development of urban cooperative banks.

Significance

• Promoting Economic Growth: NUCFDC supports the urban cooperative banking sector, indirectly aiding small farmers and weaker sections in expanding their economic activities.

• Policy Formulation: Acts as a bridge between banks and regulators, assisting state and central governments in making informed policy decisions based on sectoral realities.

• Financial Assistance: Aims to raise capital and utilize it to provide financial support to UCBs, fostering their growth and development.

Benefits

• Technological Advancements: Introducing new technologies in the urban Cooperative Banking Sector to enhance efficiency and coverage.

• Technology Platform: Providing a centralized technology platform to UCBs, improving service offerings, reducing operational costs, and addressing technological constraints.

Conclusion

• The establishment of the National Urban Cooperative Finance and Development Corporation Limited marks a significant step towards modernizing and strengthening the Urban Cooperative Banking Sector in India.

• Acting as an umbrella body and SRO, NUCFDC aims to facilitate growth, promote financial inclusion, and enhance efficiency through technological advancements. By providing specialized services and fostering collaboration between banks and regulators, it aims to contribute to the prosperity and self-reliance of the cooperative banking sector and the economy as a whole.