Digital progress for cooperative banks demands better governance first

Every financial sector has a moment when inherited ways of working begin to collide with the realities of a new operating world. Urban cooperative banks (UCBs) now stand at a moment where their founding purpose must be measured against the demands of a banking system transformed by technology. For generations they carried the responsibility of extending credit and basic financial services to small borrowers, local businesses and the urban middle class who often lay outside the reach of commercial banks. That purpose remains relevant, but the environment around it has changed irrevocably.

Over the past decade, the government's and regulators' digital-focused policies have redrawn the architecture of financial intermediation. Customers who once relied on physical branches and personal familiarity now transact, compare and judge institutions through interfaces rather than relationships. Payments have become instantaneous; grievances are escalated in real time and the tolerance for delay has narrowed to seconds. Risk, too, has changed its behaviour.

Digital rails now shape how trust is formed, how risk is transmitted and how customers decide whom they will bank with. It is within this larger shift that the cooperative banking sector’s push for broader digital permissions, including the recent push by NUCFDC to extend such access to smaller UCBs must be understood.