India Bolsters Cooperative Banks with Reforms and Innovations

In a significant move to fortify the cooperative banking sector, India's government and the Reserve Bank of India (RBI) have unveiled a series of ambitious reforms. Minister of State for Finance, Pankaj Chaudhary, announced the initiatives in the Rajya Sabha on Tuesday, highlighting efforts to improve financial health, governance, and digital integration.

Urban Cooperative Banks (UCBs), pivotal in extending banking services, have gained the green light to open new branches, maximizing reach and enhancing customer experience. To stimulate credit flow, the housing loan exposure limit for UCBs has been increased from 10% to 25% of their loans, boosting lending capacity.

Governance standards have been bolstered with amendments to the Banking Regulation Act, extending directors' tenure to ten years, facilitating disciplined oversight. Furthermore, the government has reduced the Aadhaar Enabled Payment System (AePS) licensing fee, simplifying digital payment adoption for cooperative banks.

The establishment of the National Urban Co-operative Finance and Development Corporation Limited (NUCFDC) underscores a commitment to institutional support, serving as a hub for UCBs to streamline operations. In parallel, rural banks benefit from the Sahakar Sarthi Shared Services Entity, reducing costs through shared technological resources.

Strengthening consumer trust, rural cooperative banks are now part of the RBI's Integrated Ombudsman Scheme, ensuring efficient grievance resolution. The Deposit Insurance and Credit Guarantee Corporation's (DICGC) coverage remains robust, insuring deposits up to Rs 5 lakh, nurturing depositor confidence.

The recent classification of loans to the National Cooperative Development Corporation (NCDC) for priority lending further exemplifies a well-rounded approach to fostering cooperative growth and financial inclusivity.