Challenges For Urban Co-Operative Banks

In the fast changing world economy, India assumes greater importance with consistent economic growth, good natural resources, abundant human talent and vast market potential.

Despite economic slowdown experienced by major countries, with particular reference to European countries & USA, India presents a stable picture, though the growth rate has come down.  Political Leaders as well as the Regulatory Bodies like Reserve Bank of India (RBI) have realized that the benefits of economic growth should percolate down to the poorest of the poor and are propagating the need for “Inclusive Growth”.  For this purpose, Urban Co-operative Banks (UCBs) provide the best option.

The Co-operative Banking Sector has a long tradition of over 100 years and was the pioneer of “Inclusive Growth” initiative.  As described aptly in the “Vision Document” of RBI, these Banks cater to the needs of the middle, lower middle and marginalized segment of the Society.  The Co-operative Banks have a distinct advantage and play greater role in different ways:

•     UCBs respond to the requirements/needs of the customers from middle and lower middle class who are large in numbers as per census data;
   
•     The level of “Customer Satisfaction and Comfort” is high as UCBs provide Customized Schemes for Deposits and Advances;
   
•     With the “Personal Touch’ convenience of customers is addressed properly;
   
•     Complying with the Know Your Customer (KYC) guidelines of RBI is easier for UCBs as they not only know the customer but also his family background;
   
•     The decision making is prompt and less cumbersome;
   
•     UCBs have saved the common man from the clutches of moneylenders;
   
•     Most of the UCBs have adopted advanced technology and can provide all types of services to their customers.

The UCB Sector presents a heterogeneous character when it comes to business mix of the Banks.  As per RBI Report on Trend & Progress of Banking in India, as on 31st March, 2012, there are 1618 UCBs with aggregate deposits of Rs.238500 crore and aggregate advances of Rs.158000 crore.  There are only 52 Scheduled and 42 Multi State UCBs in the Sector.  As regards deposits, 39 UCBs have deposit base of over Rs.1000 crore and they are holding 45.30% of deposits of the Sector, whereas 20 UCBs have advance base over of Rs. 1000 crore and they account for 36.50% of advances of the Sector.

With growing professionalism, financial position of UCBs has been showing signs of good improvement.  With this, the RBI has started allowing greater freedom and support for the development of the UCB Sector. 

The UCBs sector has more opportunities because of following factors:-

•     More Business Opportunities with higher rate of Economic Growth and increase in number of client base.
   
•     Untapped Geographical Areas (as only five states have major presence of UCBs).
   
•     Increasing figures of Middle class population leading to increased Business Potential.
   
•     Cross selling of Products is possible due to Personal Touch.
   
•     Computerization and Technology up-gradation is possible with less hurdles and resistance due to small number of Branches and staff
   
•     Possibilities are there to enter into Strategic Alliances for Foreign exchange Business, insurance Business, etc.

There are also certain challenges for the Sector - Capital Augmentation & lesser avenues for generating other fee based income.  Also, there is cut throat competition from Banks with large financial base.  Generally the cost of funds of UCBs is higher compared to Commercial Banks that leads to pressure on profit margin.

Though there are challenges, existence and survival of UCBs is of great importance to the client base of middle and lower income group that they serve and the challenges can be met by adopting Professional Approach, Good Corporate Governance, Technological Upgradation and Innovative HR Policies.

The Greater Bombay Co-operative Bank Ltd. (GBCB) established in 1952, is celebrating Diamond Jubilee this year.  GBCB is one of the leading Scheduled UCBs, providing modern and customer friendly services to its clients.  The Bank with 22 Branches at convenient locations in and around Mumbai, has given utmost importance to the use of technology for the convenience of the clients.  The Branches provide 8 a.m. to 8 p.m. services and are open on Sundays. 

At all the Branches, E-Lobby offers cash deposit, cheque deposit, pass-book printing, statement printing and also cash withdrawals through ATM machines are allowed.  The Bank with CBS platform provides RTGS and NEFT facility for faster remittance. 

With NFS tie –up, Bank’s customers have access to over 1 Lakh ATMs across the country.  The Bank has already started Mobile Banking and has been providing SMS alert facility.

GBCB is having deposit base of Rs. 1360 Cr with advances of Rs.800 Cr.  The Bank complies with all the parameters prescribed by RBI.  The Bank takes care of requirement of all the segments including Small/ Middle Class, Youth and Senior Citizens, Small Traders and Mid Corporate etc. 

The Bank’s recent drive to increase saving and current accounts has proved quite successful.  Also, the product of ‘Gold Loan @ 13% interest with no processing charges and prompt sanction is well received.  The Bank is poised for all-round growth with wider base.