{"id":59003,"date":"2025-11-12T19:09:21","date_gmt":"2025-11-12T13:39:21","guid":{"rendered":"https:\/\/www.nextias.com\/ca\/?p=59003"},"modified":"2025-11-13T13:14:22","modified_gmt":"2025-11-13T07:44:22","slug":"urban-cooperative-banks","status":"publish","type":"post","link":"https:\/\/www.nextias.com\/ca\/current-affairs\/12-11-2025\/urban-cooperative-banks","title":{"rendered":"Urban Cooperative Banks"},"content":{"rendered":"\n<p><strong>Syllabus: GS3\/Economy<\/strong><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Context<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Recently, the <strong>Union Home and Cooperation Minister<\/strong>, at the <strong>\u2018Co-op Kumbh 2025\u2019, <\/strong>called on <strong>Urban Cooperative Banks<\/strong> <strong>(UCBs)<\/strong> to play a transformative role in <strong>empowering India\u2019s youth and underprivileged communities.<\/strong><\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Key Highlights of Co-op Kumbh 2025<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>\u2018Delhi Declaration 2025\u2019: <\/strong>It was adopted by the <strong>National Federation of Urban Cooperative Banks and Credit Societies (NAFCUB)<\/strong>, focusing on enhancing financial stability, governance, and digitization within the cooperative banking network.<\/li>\n\n\n\n<li><strong>Digital Push:<\/strong> Two new digital initiatives <strong>Sahkar Digi-Pay and Sahkar Digi-Loan <\/strong>&nbsp;were launched to empower even the smallest cooperative banks.\n<ul class=\"wp-block-list\">\n<li>These enable <strong>digital payments and loan disbursement services<\/strong>, integrating UCBs into <strong>India\u2019s broader digital revolution<\/strong>.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Commitment to Strengthening the Cooperative Credit Ecosystem: <\/strong>The government aims to establish an <strong>UCB<\/strong> in every Indian city with a population exceeding <strong>two lakh<\/strong> within the next <strong>five years<\/strong>.\n<ul class=\"wp-block-list\">\n<li>It aims to <strong>expand the urban cooperative credit ecosystem<\/strong> and make financial inclusion more accessible across urban India.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>About Urban Cooperative Banks<\/strong> <strong>(UCBs)<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>These are <strong>financial institutions<\/strong> rooted in the cooperative movement, primarily serving <strong>urban and semi-urban populations.<\/strong>\n<ul class=\"wp-block-list\">\n<li>Cooperative societies are based on the <strong>principles of cooperation<\/strong> like mutual help, democratic decision making and open membership, unlike commercial banks.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>They cater to small businesses, salaried individuals, and lower-income groups, offering banking services such as deposits, loans, and credit facilities.\n<ul class=\"wp-block-list\">\n<li>They <strong>play a vital role in promoting inclusive economic growth<\/strong>, supporting small traders, entrepreneurs, and the weaker sections of society.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>As per <strong>RBI and NABARD,<\/strong> there are 1,457 Urban Cooperative Banks, 34 State Co- operative Banks (StCBs), 351 District Central Co-operative Banks (DCCBs) and one Industrial Cooperative Bank which are<strong> under the supervision of RBI and NABARD.<\/strong><\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Previous Efforts of Recognising Cooperative Banks<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Government of India Act (1919): <\/strong>&nbsp;It transferred the subject of <strong>\u2018Cooperation\u2019<\/strong> from the <strong>Government of India<\/strong> to <strong>Provincial Governments<\/strong>.\n<ul class=\"wp-block-list\">\n<li>The <strong>Government of Bombay<\/strong> passed the <strong>first State Cooperative Societies Act (1925)<\/strong>, which:\n<ul class=\"wp-block-list\">\n<li>Shaped and expanded the cooperative movement.<\/li>\n\n\n\n<li>Emphasized <strong>thrift, self-help, and mutual aid<\/strong>.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>It was followed by other states, marking the <strong>second phase<\/strong> in the history of Cooperative Credit Institutions.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Indian Central Banking Enquiry Committee (1931)<\/strong>: Emphasized urban banks\u2019 duty to assist <strong>small businesses and the middle class<\/strong>.<\/li>\n\n\n\n<li><strong>Mehta-Bhansali Committee (1939)<\/strong>: Recommended that cooperative societies meeting certain banking criteria be allowed to function as banks.\n<ul class=\"wp-block-list\">\n<li>It suggested forming an <strong>Association for Urban Cooperative Banks<\/strong>.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Co-operative Planning Committee (1946)<\/strong>: Acknowledged that urban banks were the <strong>best financial agencies for small people<\/strong>, often ignored by joint stock banks.<\/li>\n\n\n\n<li><strong>Rural Banking Enquiry Committee (1950)<\/strong>: Recommended setting up such banks even in <strong>smaller towns<\/strong>, given their <strong>low operational costs<\/strong>.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>RBI Study and Report (1958\u20131961)<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The <strong>Reserve Bank of India (RBI)<\/strong> conducted the <strong>first study of Urban Cooperative Banks (UCBs)<\/strong> in <strong>1958\u201359<\/strong>, and <strong>published in 1961:<\/strong>\n<ul class=\"wp-block-list\">\n<li>Recognized the <strong>financial soundness<\/strong> of UCBs.<\/li>\n\n\n\n<li>Suggested <strong>expansion<\/strong> to new centers.<\/li>\n\n\n\n<li>Urged <strong>State Governments<\/strong> to actively support their growth.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Varde Committee (1963)<\/strong>: It recommended establishing UCBs in <strong>all urban centers with populations over 1 lakh<\/strong>.\n<ul class=\"wp-block-list\">\n<li>Stressed that banks should not be <strong>community- or caste-based<\/strong>.<\/li>\n\n\n\n<li>Introduced the <strong>concept of minimum capital requirement<\/strong>.<\/li>\n\n\n\n<li>Defined <strong>population criteria<\/strong> for identifying urban centers suitable for UCB incorporation.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Madhavdas Committee (1979): <\/strong>Conducted a detailed <strong>evaluation of UCBs\u2019 role and performance<\/strong>. It recommended:\n<ul class=\"wp-block-list\">\n<li><strong>Support from RBI and Government<\/strong> for setting up UCBs in <strong>backward regions<\/strong>.<\/li>\n\n\n\n<li><strong>Viability standards<\/strong> for sustainable growth.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Hate Working Group (1981)<\/strong>: It suggested:\n<ul class=\"wp-block-list\">\n<li>Better utilization of surplus funds.<\/li>\n\n\n\n<li>Gradual alignment of <strong>Cash Reserve Ratio (CRR)<\/strong> and <strong>Statutory Liquidity Ratio (SLR)<\/strong> of UCBs with <strong>commercial banks<\/strong>, through a phased approach.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Marathe Committee (1992):<\/strong>\n<ul class=\"wp-block-list\">\n<li><strong>Redefined viability norms<\/strong> for UCBs.<\/li>\n\n\n\n<li>Initiated an era of <strong>liberalization<\/strong> within the cooperative banking sector.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Madhava Rao Committee (1999): <\/strong>It focused on:\n<ul class=\"wp-block-list\">\n<li><strong>Consolidation and control of sick banks<\/strong>.<\/li>\n\n\n\n<li><strong>Improved professionalism<\/strong> and management standards.<\/li>\n\n\n\n<li><strong>Integration<\/strong> of UCBs with the broader <strong>commercial banking system<\/strong>.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Current Challenges Faced by UCBs<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Declining Numbers:<\/strong> The total number of UCBs has dropped from 1,926 in 2004 to around 1,500 in 2024 due to regulatory and financial pressures.<\/li>\n\n\n\n<li><strong>Regulatory Constraints:<\/strong> UCBs have faced restrictions on branch expansion and licensing. New licenses have not been issued since 2004.<\/li>\n\n\n\n<li><strong>Governance and Compliance Issues: <\/strong>Many UCBs struggle with outdated governance structures, poor compliance with the Banking Regulation Act, and limited technological adoption.<\/li>\n\n\n\n<li><strong>Financial Vulnerabilities:<\/strong> Limited capital base and exposure to risky lending practices have affected their stability.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Related Initiatives and Reforms<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>NUCFDC Formation:<\/strong> NUCFDC was established to serve as an umbrella organization for UCBs, offering financial support, regulatory guidance, and capacity building.<\/li>\n\n\n\n<li><strong>Empowerment Measures:<\/strong> RBI has allowed UCBs to open new branches and empowered their boards to formulate settlement policies similar to commercial banks, under the direction of the Ministry of Cooperation.<\/li>\n\n\n\n<li><strong>Expert Committee Recommendations:<\/strong> A committee chaired by <strong>Shri NS Vishwanathan<\/strong> submitted a report in 2021 recommending the creation of a strong apex entity and improved regulatory mechanisms.<\/li>\n\n\n\n<li><strong>Modernization and Reforms in Cooperative Sector:<\/strong> It emphasized that significant policy reforms have modernized cooperatives and resolved long-pending challenges<strong> since the creation of the Ministry of Cooperation<\/strong>.\n<ul class=\"wp-block-list\">\n<li>Several <strong>state governments have adopted model bylaws for <\/strong><a href=\"https:\/\/www.nextias.com\/ca\/current-affairs\/08-02-2023\/primary-agricultural-credit-societies-pacs\" data-type=\"link\" data-id=\"https:\/\/www.nextias.com\/ca\/current-affairs\/08-02-2023\/primary-agricultural-credit-societies-pacs\"><strong>Primary Agricultural Credit Societies (PACS)<\/strong>,<\/a> ensuring uniformity and transparency.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Financial Discipline and Reduction in NPAs: <\/strong>Highlighting financial improvements, Shah stated that <strong>Non-Performing Assets (NPAs)<\/strong> in the cooperative sector have <strong>declined from 2.8% to 0.6%<\/strong> in the past two years.<\/li>\n\n\n\n<li>The <strong>Union Ministry of Cooperation <\/strong>has outlined <strong>four key objectives<\/strong>, including:\n<ul class=\"wp-block-list\">\n<li><strong>Engaging youth<\/strong> through new educational initiatives such as <strong>Tribhuvan Sahkari University<\/strong>.<\/li>\n\n\n\n<li>Promoting <strong>multi-sectoral collaboration<\/strong>.<\/li>\n\n\n\n<li>Ensuring <strong>financial discipline and efficiency<\/strong>.<\/li>\n\n\n\n<li>Expanding the <strong>reach of cooperatives across urban and rural India<\/strong>.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>The <strong>United Nations (UN)<\/strong> designated <strong>2025 <\/strong>as the <strong>International Year of Cooperatives (IYC 2025) <\/strong>under the theme <strong>\u2018Cooperatives Build a Better World\u2019, <\/strong>which aims to<strong> <\/strong>serve as a platform to <strong>modernize and scale the cooperative banking system<\/strong>.<\/li>\n<\/ul>\n\n\n\n<p><a href=\"https:\/\/ddnews.gov.in\/en\/govt-to-establish-urban-cooperative-bank-in-every-city-with-over-two-lakh-population-in-next-five-years-home-minister\/\" target=\"_blank\" rel=\"noopener\">Source: DD News<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p><strong>Context<\/strong><\/p>\n<li class=\"ms-5\">Recently, the Union Home and Cooperation Minister, at the \u2018Co-op Kumbh 2025\u2019, called on Urban Cooperative Banks (UCBs) to play a transformative role in empowering India\u2019s youth and underprivileged communities.<\/li>\n<p><\/p>\n<p><strong>Key Highlights of Co-op Kumbh 2025<\/strong><\/p>\n<li class=\"ms-5\">\u2018Delhi Declaration 2025\u2019: It was adopted by the National Federation of Urban Cooperative Banks and Credit Societies (NAFCUB), focusing on enhancing financial stability, governance, and digitization within the cooperative banking network.<\/li>\n<li class=\"ms-5\">Digital Push: Two new digital initiatives Sahkar Digi-Pay and Sahkar Digi-Loan \u00a0were launched to empower even the smallest cooperative banks.<\/li>\n<li class=\"ms-5\">These enable digital payments and loan disbursement services, integrating UCBs into India\u2019s broader digital revolution.<\/li>\n<li class=\"ms-5\">Commitment to Strengthening the Cooperative Credit Ecosystem: The government aims to establish an UCB in every Indian city with a population exceeding two lakh within the next five years.<\/li>\n<p><a href=\"https:\/\/www.nextias.com\/ca\/uncategorized\/12-11-2025\/urban-cooperative-banks\" class=\"btn btn-primary btn-sm float-end\">Read\u00a0More<\/a><\/p>\n","protected":false},"author":15,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[21],"tags":[],"class_list":["post-59003","post","type-post","status-publish","format-standard","hentry","category-current-affairs"],"acf":[],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/59003","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/users\/15"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/comments?post=59003"}],"version-history":[{"count":3,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/59003\/revisions"}],"predecessor-version":[{"id":59073,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/59003\/revisions\/59073"}],"wp:attachment":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media?parent=59003"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/categories?post=59003"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/tags?post=59003"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}