TAG: GS 3: ECONOMY
THE CONTEXT: Union Home Minister and Minister of Cooperation inaugurated the National Urban Cooperative Finance and Development Corporation Limited (NUCFDC) recently.
EXPLANATION:
- This marks a significant step towards the establishment of an umbrella organization for urban cooperative banks.
National Urban Cooperative Finance and Development Corporation Limited (NUCFDC):
- The National Urban Cooperative Finance and Development Corporation Limited (NUCFDC) is an umbrella organization established to support and promote Urban Cooperative Banks (UCBs) in India.
- It was inaugurated by the Union Home Minister and Minister of Cooperation, Shri Amit Shah, on March 2, 2024.
Objectives of NUCFDC:
- To provide specialized functions and services to UCBs, including financial assistance, capacity building, and technological upgradation.
- To facilitate communication and coordination between UCBs and regulators, such as the Reserve Bank of India (RBI).
- To address the challenges faced by UCBs, such as financial instability, governance issues, and lack of professionalism.
- To promote the modernization and strengthening of the Urban Cooperative Banking Sector in India.
Benefits of NUCFDC
- The establishment of NUCFDC is expected to benefit both UCBs and their customers in several ways:
- Enhanced financial stability: NUCFDC can provide financial assistance to UCBs in distress, thereby helping to improve their financial health and stability.
- Improved governance: NUCFDC can promote good governance practices among UCBs by providing training and capacity building programs for directors and employees.
- Increased efficiency: NUCFDC can help UCBs to adopt new technologies and improve their operational efficiency.
Urban Cooperative Banks:
- Urban Cooperative Banks (UCBs) are registered as cooperative societies under the provisions of, either the State Cooperative Societies Act of the State concerned or the Multi State Cooperative Societies Act, 2002.
- They are regulated and supervised by the Registrar of Cooperative Societies (RCS) of State concerned or by the Central Registrar of Cooperative Societies (CRCS), as the case may be.
- They primarily operate in urban and semi-urban regions of India.
- These entities cater to banking requirements of small businesses, individuals, and communities.
- Services include deposit accounts, loans, remittances, and other financial products and services.
- At present, there are over 1,500 scheduled and non-scheduled Urban Cooperative Banks in India.
Strength and Impact of Cooperative Banks:
- Cooperative banks collectively boast a significant strength, with 11,000 branches spread across 1,500 banks and deposits amounting to Rs 5 lakh crore.
- Urban cooperative banks have achieved a commendable reduction in their Net Non-Performing Assets (NPA), currently standing at 2.10%.