National Urban Cooperative Finance and Development Corporation Limited (NUCFDC)

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Context

• Cooperation Minister Amit Shah inaugurated the National Urban Cooperative Finance and Development Corporation Limited (NUCFDC), the apex body of Urban Cooperative Banks (UCBs), emphasizing the importance of people's participation in the country's development.
• He highlighted the need for an umbrella organization for UCBs, which was recommended by reports like the Vishwanathan Committee.

READ ABOUT COOPERATIVE BANKS: https://www.iasgyan.in/daily-current-affairs/cooperative-banks

Background and Formation of NUCFDC:

• NUCFDC was established after nearly two decades of struggle, aiming to promote cooperation and mutual progress among cooperative institutions.

Objectives and Recommendations:

• Shah recommended that NUCFDC should set up one urban cooperative bank in each unrepresented town/city within a time-bound program.
• He urged UCBs to upgrade themselves to provide modern banking facilities like ATM facility, credit/debit cards, clearing system, maintain SLR limit, and refinancing, similar to public and private banks.

RBI Approval and Functionality:

• NUCFDC has received approval from the Reserve Bank of India (RBI) to function as a non-banking finance company and a self-regulatory organisation for the urban cooperative banking sector.

Role and Targets:

• The main objective of NUCFDC should be to help urban cooperative banks adhere to the Banking Regulations Act and bring professionalism in their work.
• There are more than 1,500 UCBs with 11,000 branches, having a deposit of ₹5 lakh crore and credit base of ₹3.50 lakh crore across the country.

Future Plans and Capitalization:

• NUCFDC aims to achieve its target paid-up capital within a year and not depend on others for funding.
• The National Cooperative Development Corporation (NCDC) has committed ₹200 crore to NUCFDC, emphasizing the need for UCBs to meet the paid-up capital to gain confidence from RBI.

Statutory Framework and Compliance:

• NUCFDC's role includes helping UCBs adhere to the Banking Regulations Act, ensuring statutory compliance, and promoting professionalism in their operations.

Challenges and Opportunities:

• While UCBs have reduced their net NPA rate to 2.10 per cent, there is still scope for further reduction, indicating challenges in asset quality management.
• The growth of UCBs presents opportunities for financial inclusion and economic development, especially in unrepresented areas.

Conclusion:

• The establishment of NUCFDC marks a significant step towards strengthening the urban cooperative banking sector in India, with a focus on professionalism, compliance, and financial inclusion.

Urban Cooperative Banks (UCBs): UCBs are a type of Co-operative Banks distinct from commercial banks, originating from the concept of co-operative credit societies. Members of these banks come together from a community to extend loans to each other at favorable terms. Co-operative Banks are broadly classified into Urban and Rural based on their operational region. UCBs are regulated and supervised by State Registrars of Co-operative Societies (RCS) for single-state banks and by the Central Registrar of Co-operative Societies (CRCS) for multi-state banks, in addition to oversight by the RBI.

PRACTICE QUESTION Q. Which regulatory authority supervises single-state banks Urban Cooperative Banks (UCBs) in India? a) Reserve Bank of India (RBI) b) State Registrars of Co-operative Societies (RCS) c) Central Registrar of Co-operative Societies (CRCS) d) Ministry of Finance Answer: c) Central Registrar of Co-operative Societies (CRCS)