RBI deputy guv asks co-ops to adopt tech

Says they can lead in financial inclusion

 Reserve Bank of India (RBI) Deputy Governor R Gandhi has called for improvement in the state of cooperative banks in India since they compete and coexist with other more ‘stable’ banking enterprises and financial institutions.

“Cooperative banks must adopt technology in a big way since it’s the need of the hour, and it will enable them to function in a better way,” he told delegates at the silver jubilee function of the National Institute for Rural Banking (NIRB) here on Friday.

“There is an immense lack of technology being integrated into the functions of cooperative banks; they are reluctant to adopt it, until RBI and NABARD (National Bank for Agriculture and Rural Development) forced it down on them,” he added.

Citing a slew of issues that have dogged the cooperative banking sector such as low capital, poor management, and intrusive governments, Gandhi said there is a need for them to find and recover their strengths.

“A major concern is the decline in the cooperative character of these banks, owing to a few restrictive practices and wrong formats in voting. There is also a lack of professionalism on the part of several cooperative banks, which calls for favourable corporate governance in this area,” Gandhi said.

Although cooperative banks have existed for over a century, currently they hold a measly 5 per cent share in the banking system. As of 2014, there are 53 scheduled urban cooperative banks, and 31 state cooperative banks.     

‘Decade of rural banking’

But Gandhi lauded the significance of cooperative banks. “Being intertwined with local communities, cooperative banks are better geared to bring more customers under their fold. Built on a democratic footing, with strong local roots, cooperative banks will be in the centre of the financial inclusion scene of the country,” he said.

Earlier, referring to the scope for developing regional rural banks (RRBs), NABARD Deputy Managing Director R Amalorpavanathan said, “This is the decade of rural banking. There is intense competition on every front — technology, service, products and payment systems. Rural banks must gear up and grow through competition (payment banks and small financial firms also pose a challenge). Urban banking has already settled in the market; now it’s the time for rural banking to lift itself up.”