UCB digital push: Umbrella body NCFDC to be operational by early 2023

The proposed Umbrella organisation for Urban Cooperative Banks, National Cooperative Financial and Development Company (NCFDC), will be ready for operations in early calendar 2023.

Prior to that, the NCFDC, which is a non-banking finance company, will raise Rs 300 crore as capital from member banks and build a team for operations. J Mehta, president of the National Federation of Urban Co-operative Banks and Credit Societies (NAFCUB), said it would apply for an NBFC licence, after getting commitments for equity infusion. This is expected to happen by December. NAFCUB has been tasked to set up an umbrella body.

The company would work on bulk buying of IT and digital services and develop the digital banking backbone, giving access to 50 million UCB customers. This entity will not nurse a cooperative bank.

About 70 per cent of UCBs are small, tier-I banks. They need support, and the technology they use will not be a capital expenditure, but will be available on rent so that they do not have to spend much, Mehta said.

Customers of UCBs, including those with a single branch, will be able to access their bank accounts across two million customer touchpoints.

The platform also would help smaller UCBs access debt markets to monetise part of their balance sheets for liquidity and use the funds for lending.

According to a concept note prepared for the umbrella body, about $50 billion (Rs 3.9 trillion) of additional financing to MSMEs and lower middle class borrowers of UCBs would be facilitated by unlocking liquidity. This covers excess money maintained in Cash Reserve Ratio, investment into bonds for Statutory Liquidity Ratio and bank deposits.

The NCFDC will be the mother brand for member UCBs, and will help build customer confidence and ensure loyalty. Each bank will have to affix the NCFDC name along with their own. This simple act itself will see the NCFDC brand on about 11,500 branches.