Digitization of Co-operative Banks by 2025: NABARD Chairman: Rediff Moneynews

New Delhi, Nov 26 (PTI) National Bank for Agriculture and Rural Development (NABARD) Chairman Shaji KV on Tuesday said that cooperative banks are expected to be digitized by March 2025 with a view to streamlining operations and improving the efficiency of these financial institutions.

The Reserve Bank of India (RBI) has directed all cooperative banks to adopt the Core Banking Solution (CBS), marking a major step towards modernization.

“We carry out the digitalization of cooperatives on behalf of the central government. It will happen in March 2025 and by then we will invite fintechs to work on it. We need a lot of technological solutions to work on this digitized database which in addition we will have looking at transaction traces from a digital platform,” he said.

Addressing a CII event here, he said NABARD proposes to set up a common shared services entity for all rural cooperatives across the country.

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

This entity will also need a lot of fintech collaboration and there are many opportunities for fintechs to collaborate with both regional rural banks (RRBs) and cooperative banks.

As smaller entities, most co-operative banks are currently unable to invest in technology, he said.

Shaji said fintechs should look to increase their focus on the co-operative sector and RRBs, noting that both are engaging with technology in a bigger way.

There will be ample scope in the coming days for fintechs to come up with technical solutions for the digitized database and platforms in the two areas of cooperatives and RRBs, he said.

Noting that RRBs form the middle tier of the banking system in the country, he said these banks are engaging in technology on a larger scale due to the intervention of the Department of Financial Services (DFS) in the Ministry of Finance.

Now, an agreement is also being reached in principle on the consolidation of the RRBs by the Ministry of Finance, and this could lead to a situation of ‘One State, One RRB’, he added.

Earlier this month, the Finance Ministry initiated the fourth round of consolidation for RRBs and the number of such banks is likely to come down to 28 from 43 at present.

According to the finance ministry’s roadmap, 15 RRBs operating in different states will be merged to achieve operational efficiency and cost rationalization.

The states where RRBs will be consolidated include Andhra Pradesh, which has the maximum of four RRBs, Uttar Pradesh and West Bengal (three each), and Bihar, Gujarat, Jammu & Kashmir, Karnataka, Madhya Pradesh, Maharashtra, Odisha and Rajasthan. 2 each).