RBI’s Swaminathan Urges UCBs To Strengthen Governance, Embrace Secure Tech

As regulatory demands and technological complexity rise, UCBs face increasing pressure on profitability, he said. Smaller banks, in particular, struggle to invest adequately in risk mitigation

Speaking at a seminar for UCB directors at the College of Agricultural Banking in Pune on Friday, he urged directors to prioritise depositor trust while building resilient institutions

Source : PTI

RBI Deputy Governor Swaminathan J stressed the need for Urban Cooperative Banks (UCBs) to fortify their foundations through better governance, effective risk management, and thoughtful use of technology. Speaking at a seminar for UCB directors at the College of Agricultural Banking in Pune on Friday, he urged directors to prioritise depositor trust while building resilient institutions.

“Governance must be sharper. Risks must be better understood and managed. Technology must be adopted thoughtfully and securely. Above all, the trust of your depositors must remain non-negotiable,” Swaminathan said.

Highlighting the unique identity of UCBs, he said they are not merely profit-seeking entities but are structured around a sense of purpose. Their deep-rooted community presence and personal touch make them distinct players in India’s financial system.

“Customers are at ease walking into their neighbourhood UCB branch,” he said. “This reflects the essence of the cooperative model – banking built on relationships, local knowledge, and grassroots connection.”

Key Building Blocks For Future Readiness

Swaminathan identified five crucial areas UCBs must focus on: strengthening governance, enhancing board independence, working constructively with auditors, and responsibly adopting technology. He underlined that strong governance starts with “active, informed, and independent boards” committed to depositor interests.

As regulatory demands and technological complexity rise, UCBs face increasing pressure on profitability, he said. Smaller banks, in particular, struggle to invest adequately in risk mitigation and compliance infrastructure.

Umbrella Organisation To Support UCB Growth

To address these challenges, the RBI has supported the creation of the National Urban Cooperative Finance and Development Corporation Ltd. (NUCFDC), envisioned as a shared platform offering centralised services, technology support, and capacity building. “It can be a force multiplier – especially for smaller UCBs – allowing them to benefit from economies of scale while retaining their unique identity and local focus,” he said.

The NUCFDC will also assist with capital support, short-term liquidity, and refinancing, enabling member banks to remain competitive without sacrificing their cooperative roots. “The Reserve Bank stands with you – as a regulator, as a guide, and as a partner,” Swaminathan concluded. “Let us work together to ensure that UCBs remain a strong, resilient, and vibrant part of India’s financial system.”