Urban Cooperative Banks in India

Urban Co-operative Banks are important part of the financial

system in India. Sector has witnessed phenomenal growth during the last one and half decades. It was mainly due to liberalization and globalization policy of government of India which encouraged setting-up of new urban cooperative banks. Further, the deregulation of interest rates, as available to the commercial banks, enabled the UCBs to mobilize huge amount of deposits. While all these positive developments taking place on one hand it was found that there are certain infirmities in the sector that have manifested in the form of weakness of some of the entities resulting in erosion of public confidence and causing concern to the regulators as also to the sector at large. Reserve Bank Of India (RBI) being a regulatory agency, in order to mitigate the risks to which individual banks and system are exposed has been providing guidelines such as Assets and Liability Management, norms for provisioning ofNPAs, KYC, Anti Money Laundering etc. Due to fact that use ofIT is at very infancy stage except select cooperative banks majority of the Cooperative banks are facing difficulties in complying with regulatory guidelines on one hand and on other hand with respect to exercising sound control on business operations as information required for the purpose of decision making is not readily available. Recent changes in policy of Government of India such as application of income tax to cooperative banks has added to the existing problems of cooperative banks. Important challenges being faced by Urban cooperative banks at present are Competition, increasing customer expectations, pressures on reducing cost of business operations, lack of timely decision making information. Implementation of Core Banking Solution (CBS) is being considered as strategy to face these challenges.