Cooperative Banks To Go Digital By 2025, Says NABARD Chairman

"Both government and the RBI have agreed in principle for this entity. We jointly with the central government and cooperative banks will set up a separate company for digital adoption," Shaji said

This initiative will require strong collaboration with fintech companies, presenting numerous opportunities for fintechs to partner with both regional rural banks (RRBs) and cooperative banks

Source : Pexels

Shaji K.V., Chairman of the National Bank for Agriculture and Rural Development (NABARD), announced on Tuesday that cooperative banks are set to be fully digitized by March 2025. This move aims to streamline operations and improve the efficiency of these financial institutions. In line with this initiative, the Reserve Bank of India (RBI) has instructed all cooperative banks to implement Core Banking Solutions (CBS), marking a crucial step in their modernisation efforts.

"We are on behalf of central government undertaking digitisation of cooperatives. By March 2025 it will happen and by that time we will invite fintechs to work on that. We need a lot of technology solutions to work on these digitised database that we will have besides looking at transaction trails of digital platform," he said.

Speaking at a CII event, he mentioned that NABARD is planning to establish a nationwide shared services platform for all rural cooperatives.

"Both government and the RBI have agreed in principle for this entity. We jointly with the central government and cooperative banks will set up a separate company for digital adoption," he said.

This initiative will require strong collaboration with fintech companies, presenting numerous opportunities for fintechs to partner with both regional rural banks (RRBs) and cooperative banks. Due to their smaller size, most cooperative banks are currently unable to invest heavily in technology, Shaji noted.

He emphasised that fintechs should increase their focus on the cooperative and RRB sectors, as both are increasingly adopting technology. In the near future, there will be ample opportunities for fintechs to develop tech solutions and work on digitised databases and platforms within these sectors.

Shaji further highlighted that RRBs serve as a crucial middle layer in the country's banking system, and their engagement with technology has grown significantly, partly due to the intervention of the Department of Financial Services (DFS) in the finance ministry.

He also mentioned that the finance ministry is considering the consolidation of RRBs, which could result in the "One State, One RRB" model. Earlier this month, the finance ministry launched the fourth round of consolidation for RRBs, which is expected to reduce the number of such banks from 43 to 28.

According to the finance ministry's roadmap, 15 RRBs across various states will be merged to improve operational efficiency and reduce costs. States like Andhra Pradesh, with the highest number of four RRBs, as well as Uttar Pradesh, West Bengal (three each), and Bihar, Gujarat, Jammu & Kashmir, Karnataka, Madhya Pradesh, Maharashtra, Odisha, and Rajasthan (two each) will be impacted by the consolidation.