India’s co-operative banking sector is undergoing transformation. Urban cooperative banks and other cooperative banks have improved systems, governance and financial discipline while continuing to serve small businesses, traders, salaried people and local communities.
Unlike commercial banks, many co-operative banks are driven by social service. Directors and chairpersons often contribute time and experience without substantial remuneration, gaining practical knowledge of banking, lending, recovery and local economic conditions.
However, their smaller scale creates an economic challenge. Their loan volumes are limited, while technology, compliance, cybersecurity, manpower and regulatory costs keep rising. In lending too, co-operative banks may require substantially higher security against loans.
A co-operative bank with over 30 branches earning around ₹5 crore profit could see a significant share consumed if required to appoint several highly paid professionals to its Board and managerial positions.
The government and RBI rightly seek stronger governance, expertise, risk management, transparency and technology, but professionalisation should not weaken smaller banks.
The National Urban Cooperative Finance and Development Corporation (NUCFDC) has been established as an umbrella organisation for urban co-operative banks with the support of the ministry of cooperation and RBI. It provides shared IT infrastructure, operational support, technology, training, consultancy and fund-based and non-fund-based services. Its “Bank in a Box” concept offers core banking, digital payments, cloud, cybersecurity and compliance services affordably.
This shared-cost model should extend to professional resources. Instead of every small or medium-sized bank separately employing expensive specialists in cybersecurity, information technology, treasury, legal compliance, risk management and human resources, NUCFDC could maintain panels of qualified experts available when required. Its proposed services already include HR support for searching for directors, key managerial personnel and staff.
Professionalisation should not mean that experienced elected directors are treated as incapable merely because they do not possess formal professional qualifications. A director who has helped run a co-operative bank for 15 or 20 years may possess valuable knowledge of businesses, borrowers, recovery problems and member expectations. Boards should combine specialised professional expertise with practical cooperative banking experience.
The Government has recognised resource pooling as a strength of the co-operative movement. Applying it to professional management can reduce costs while giving smaller banks access to highquality expertise across the banking system.
Co-operative banks must become more professional, technologically advanced, transparent and financially disciplined without losing their member and community connection. NUCFDC can help make professionalism affordable through shared infrastructure and services. The future should unite experience and professionalism, preserving the social purpose of co-operation while strengthening competitiveness.
Author is Director of OPD peoples co-op bank and independent journalist.
