National Urban Cooperative Finance and Development Corporation Limited (NUCFDC)
March 3, 2024

Why in News?

  • The Union Cooperation Minister inaugurated an umbrella organisation for urban cooperative banks (UCB) - the National Urban Cooperative Finance and Development Corporation Limited (NUCFDC).

What’s in Today’s Article?

  • What is Cooperative Banking?
  • The Urban Cooperative Banks in India
  • About the NUCFDC
  • Significance of the NUCFDC

What is Cooperative Banking?

  • Meaning: In order to support the financial needs of a community such as a village or a specific community, people come together to pool resources and provide banking services such as loans, savings accounts, etc.
  • Working:
    • Membership: Individuals or businesses who meet specific eligibility criteria can become members by purchasing shares or making an initial deposit
    • Democratic Governance: Every member has equal voting rights regardless of the number of shares they hold.
      • Members elect a board of directors among themselves to oversee the bank’s operations and make key decisions.
  • Structure:
    • They are regulated by both the Reserve Bank of India (RBI) and the respective state governments. They (like the PACS) registered under the Co-operative Societies Act.

The Urban Cooperative Banks in India:

  • At present, there are over 1,500 scheduled and non-scheduled Urban Cooperative Banks in India with a total number of branches exceeding 11,000.
  • The banks have a deposit size of over Rs 5.33 lakh crore, and total lending of more than Rs 3.33 lakh crore.
  • The Urban Cooperative Banks in the country have reduced their Net NPA rate to 2.10% and there is a need for further improvement.
  • Many of these banks have constraints related to technology platforms, and difficulties in offering modern banking services.

About the NUCFDC:

  • The NUCFDC has received Certificate of Registration (CoR) from the RBI to operate as a Non-Banking Finance Company (NBFC) and serve as the umbrella organisation for the urban cooperative banking sector.
  • In addition to this, it will be allowed to operate as a Self-Regulatory Organisation (SRO) for the sector.
  • The NUCFDC aims to raise capital, with plans to reach a capital base of Rs.300 crores.
    • It intends to utilise this capital to support Urban Cooperative Banks and develop a shared technology platform to improve service offerings and reduce costs.
  • Besides offering liquidity and capital support, the umbrella organisation would set up a technology platform that can be shared by all UCBs, enabling them to widen their range of services at a relatively lower cost.
    • It can also offer fund management and other consultancy services.
  • The umbrella organisation will provide various facilities to small banks, facilitate dialogue between banks and regulators, and work on improving communication.

Significance of the NUCFDC:

  • If India wants to become the world's third-largest economy, economic development should be inclusive and comprehensive.
    • If India wants to move forward with this concept, the goal should be to establish Urban Cooperative Banks in every city.
  • The NUCFDC is another milestone in achieving the goal of ‘Sahakar se Samriddhi’ to make ‘Aatma Nirbhar’ Bharat, as it aims to modernise and strengthen the UCBs in India.
  • This umbrella organisation is a security shield for small banks, which will increase the confidence of depositors.