Urban cooperative banks should prioritise governance, risk management: RBI DG

Mumbai, Jul 18 (PTI) Underlining that Urban Cooperative Banks (UCBs) are driven by a purpose beyond profit, RBI Deputy Governor Swaminathan J on Friday asked their directors to focus on enhancing governance, risk management, and adopting secure technology to make them more sound and robust.

"Governance must be sharper. Risks must be better understood and managed. Technology must be adopted thoughtfully and securely. Above all, the trust of your depositors must remain non-negotiable," he said while addressing a seminar for directors of UCBs held in College of Agricultural Banking, Pune.

Pointing out that UCBs matter, he said, they represent a model that is built not just on profit, but on purpose.

"The Reserve Bank stands with you - as a regulator, as a guide, and as a partner. Let us work together to ensure that UCBs remain a strong, resilient, and vibrant part of India's financial system," he said.

What sets UCBs apart is their deep-rooted presence in the community and their ability to offer personalised, responsive service, customers are at ease walking into their neighbourhood UCB branch, he said, adding, this reflects the essence of the cooperative model - banking built on relationships, local knowledge, and grassroots connection.

While UCBs are rooted in cooperative values, they are banks - licensed to accept public deposits and expected to operate with the same prudence, integrity, and accountability that banking demands, he said.

Talking about five critical areas which are essential building blocks of strong and sustainable institutions, he said, strengthening corporate governance and accountability, engaging constructively with auditors, and embracing technology with responsibility are some of the priorities that directors should adopt.

Strong governance begins with active, informed, and independent boards - boards that place the long-term interests of the institution and its depositors above all else, he said.

Observing that in today's environment, the challenge of limited scale has become more pressing for UCBs - particularly in areas such as technology adoption, cybersecurity, risk management, and compliance, he said, as banking becomes more technology-intensive and regulatory expectations rise, the cost of staying competitive and secure is increasing.

For many individual UCBs, making the necessary investments while maintaining profitability is becoming increasingly difficult, he said, adding, the creation of the National Urban Cooperative Finance and Development Corporation Ltd. (NUCFDC) - as an Umbrella Organisation - was a response to this evolving challenge.

The Umbrella Organisation is envisioned as a shared platform that can support member banks with common technology solutions, centralised services, capacity-building programmes, and improved access to modern tools and expertise, he said.

It can be a force multiplier - especially for smaller UCBs - allowing them to benefit from economies of scale while retaining their unique identity and local focus, he said.

NUCFDC is also expected to provide certain fund-based facilities to member banks such as supporting them in capital enhancement, providing refinance, and addressing short-term liquidity requirements, he added. PTI DP HVA