NUCFDC Plans to Modernize Urban Co-Operative Banks by 2029

The National Urban Co-operative Finance and Development Corporation (NUCFDC) convened a key meeting in Mumbai, setting the stage for a new phase of modernization in the Urban Co-Operative Banking sector. The gathering focused on the future of the UCBs and the role of Umbrella Organizations, marking a significant step toward fostering dialogue and ensuring sustainable growth for these institutions.

The meeting, which included participation from key stakeholders from Ministry of Co-operation, Reserve Bank of India, the Registrar of Co-operative Societies, and the UCBs, also focused on strengthening governance frameworks to ensure the long-term stability of UCBs, and digital transformation within the sector. Speakers highlighted the need for greater collaboration between UCBs, regulators, and government agencies to tackle challenges and unlock growth opportunities.

In his inaugural address, Shri Jyotindra Mehta, Chairman, NUCFDC outlined an ambitious roadmap that aims to double the profits of urban co-operative banks (UCBs) by 2029, positioning the sector for long-term sustainability and competitiveness. Shri Jyotindra Mehta underscored the importance of robust governance and operational improvements. "The UCB sector must keep pace with the evolving banking landscape. They must adopt modern technologies and ensure compliance to thrive”, he said.

One of the central themes discussed was the role of umbrella organizations - NUCFDC in guiding UCBs towards greater profitability and operational efficiency. Launched earlier this year by the Ministry of Cooperation, the NUCFDC aims to serve as a pivotal force in the modernization of the urban cooperative banking sector. The organization aims to support UCBs through a series of initiatives focused on digital transformation, compliance & governance, and upskilling of human capital of the sector. He revealed that the organization is preparing to launch several products & services that will help banks meet regulatory requirements efficiently. NUCFDC envisions to introduce centralized IT platform to offer secure, scalable solutions to address the cybersecurity vulnerabilities and resource constraints that many UCBs face.

In addition to cybersecurity enhancements, NUCFDC is also pushing for improved vendor management and software support for the sector. NUCFDC is working to standardize core banking software (CBS) across the sector. The organization has already initiated discussions with leading CBS providers to implement a system that is both cost-effective and meets cybersecurity standards.

The overarching goal of these efforts is to foster a unified, upgraded UCB ecosystem where no bank is left behind due to compliance failures or technological limitations. "Our first priority is ensuring zero closures of UCBs due to these issues, and we aim to create a sustainable and profitable future for all UCBs ," Mehta said.

A total of 185 UCBs and 7 state federations have already signed up with the NUCFDC. The organization is working towards the RBI’s Rs 300 crore capital target. Having raised ₹118 crore so far, plus commitments worth Rs 56 crore, the organization aims to meet the remaining target by February 2025. Mehta acknowledged that the integration of all UCBs into the NUCFDC’s framework will be gradual due to the sector’s fragmentation. He emphasized that the capital infusion is critical for driving growth and modernization within the sector. However, achieving this goal will require UCBs to unite under a single umbrella organization, a model that has proven successful globally. The broader objective is to ensure the long-term sustainability of UCBs, helping them avoid penalties and strengthen their position in the financial system.