Urban Cooperative Banks need a renewed focus on governance, professional management, and strong internal systems

Swaminathan J, Deputy Governor, Reserve Bank of India has noted in a latest speech that Urban Cooperative Banks or UCBs have long been an essential part of India’s cooperative story, providing banking services to segments - often underserved by larger banks - small traders, self-employed individuals, salaried workers, and others in the informal sector. While UCBs are rooted in cooperative values, they are banks - licensed to accept public deposits and expected to operate with the same prudence, integrity, and accountability that banking demands. Banking is built entirely on the trust of depositors. Trust must be earned and protected every single day - through sound governance, effective risk management, and an unwavering commitment to depositors’ interests.

He stated that recognising both the importance of UCBs and the challenges they face, the Government and the Reserve Bank have taken several steps in recent years to support the sector’s stability and growth. Based on the recommendations of the Expert Committee chaired by former Deputy Governor, N. S. Vishwanathan, a four-tiered regulatory framework was introduced to bring proportionality in regulation. The establishment of a sector-wide Umbrella Organisation was also facilitated to help address issues of scale, particularly in technology and capacity building. Recently, the priority sector lending guidelines for UCBs were revised in response to feedback from the sector.

While these measures reflect the commitment of the Reserve Bank and the Government to support and strengthen the UCB sector, lasting progress must ultimately come from within. Government and regulators can enable, but it is the internal resolve and discipline of each institution that will determine its long-term resilience. This calls for a renewed focus on governance, professional management, and strong internal systems. It is therefore essential that you, as Directors, take the lead in building institutions that are capable, forward-looking, compliant, and - most importantly - worthy of the trust placed in them.

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