K.V.Shaji, Chairman, NABARD.
| Photo Credit:
BIJOY GHOSH
The government, NABARD and entities in the short-term Rural Co-operative Credit (RCC) ecosystem plan to collectively invest about $1,000 crore to float a shared services entity as part of an ambitious plan to ensure that RCCs’ customer services are on a par with commercial banks.
The new entity will provide technology support services to short-term co-operatives in the three-tier RCC ecosystem comprising State Co-operative Banks (StCBs), District Central Co-operative Banks (DCCBs) and Primary Agricultural Credit Societies (PACs).
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Shaji KV, Chairman, NABARD (National Bank for Agriculture and Rural Development), said: “We are enhancing technology capabilities of short-term RCCs. We are establishing a shared services entity for providing them technology support.
“Co-operative banks are already on the Core Banking Solution (CBS) platform, but they don’t have other things such as loan origination and management systems, credit underwriting standards, fintech collaborations, etc. For small banks, all these things are difficult (to implement due to limited resources), but for commercial banks, it is easier.”
At end-March 2024, there were 34 StCBs with 2,140 branches and 351 DCCBs with 13,759 branches. At end-March 2023, there were 1,06,955 PACS spread over 6.5 lakh villages, per RBI data. These entities provide crop loans and working capital loans to farmers and rural artisans.
In an interaction with businessline, NABARD chief, observed that the Ministry of Co-operation wants co-operative banks in the RCC fold to offer services comparable with commercial banks.
“For that, these co-operative banks have to invest in technology, which individually they will not be able do. So, we are bringing these banks together, and then we will set up a shared services entity, co-owned by the Government of India, NABARD and co-operative banks.”
“This entity will invest in technology and such other activities which they want. Whatever services a commercial bank is offering, those should be made available to their customers also,” Shaji said.
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NABARD chief underscored that RBI has given in-principle approval for the shared services entity, which will be in nature of a non-deposit taking, non-banking financial company.
“We are awaiting the final approval. Government of India is also working with RBI on this. So once that happens, maybe, in another six-seven months, co-operative banks’ transparency and loan underwriting standards will improve,” he said.
In 2023-24, RCCs’ share in total credit to agriculture declined for the second consecutive year (from 13 per cent in FY22 to 11 per cent in FY23 and 9.5 per cent in FY24) due to increasing reach of commercial banks via technology and branch expansion, according to RBI.
