(MENAFN- Live Mint) New Delhi: The National Urban Cooperative Finance and Development Corporation (NUCFDC) plans to seek Self-Regulatory Organisation (SRO) status for co-operative banks from the Reserve Bank of India in the next two months, as it is near the ₹300 crore paid-up capital threshold, said a top official in an interview.

NUCFDC CEO Prabhat Chaturvedi said that board resolutions for additional capital contributions (to reach ₹300 crore capital) by other urban cooperative banks (UCBs) are already in place. By 17 November, contributions will start flowing into NUCFDC, with share allotments beginning in mid-December. NUCFDC is the umbrella organisation for cooperative banks.

“Following this round of capital raising from UCBs, we will have a paid-up equity capital exceeding ₹300 crore, qualifying us to seek SRO status from RBI. Additionally, with this level of capital, we aim to initiate our fund-based services, including loans, Tier 2 capital support, provide refinance facilities to UCBs, and extend liquidity support,” Chaturvedi explained.

Key Takeaways

• NUCFDC expects to apply for Self-Regulatory Organization (SRO) status from RBI by early January, having secured commitments to cross the ₹300 crore paid-up capital threshold.
• The SRO status will establish NUCFDC as the single regulatory body for the Urban Cooperative Banking sector, acting as an extended oversight arm for RBI.
• NUCFDC has launched two core digital solutions, Sahakar Digipay and Sahakar Digiloan, to standardize and modernize payments and lending operations across UCBs.
• Though only 440 of 1,462 UCBs are currently partners, they represent a commanding 70% of the sector's total ₹5.5 trillion deposit base, providing significant scale for collective negotiation.
• With the capital milestone, NUCFDC will launch fund-based services, including loans, Tier 2 capital support, refinance facilities, and liquidity support for participating UCBs.

The Self-Regulatory Organisation status will enable NUCFDC to oversee, regulate, and enforce standards within the urban cooperative banking sector. This will position the corporation as the sole SRO for the sector and as an arm of RBI, bridging the gap between regulators and the numerous UCBs.

NUCFDC's capital is augmented by the government through the National Cooperative Development Corporation (NCDC), which contributes 20% of its paid-up capital. The remaining 80% is subscribed by participating UCBs.

UCB support

Chaturvedi stated that NUCFDC has received broad support from UCBs, with 440 of the total 1,462 cooperative banks currently partnering in the initiative.“This constitutes a third of the total UCBs in the country, but they account for 70% of the total deposit base of ₹5.5 trillion in the sector,” he said.

“...our goal is for all UCBs to join us, so that we can achieve economies of scale and conduct collective negotiations on their behalf. Whether it involves IT or non-IT services...any kind of service. We assess quality, reduce costs, and make them affordable for all banks. This is the role of collective negotiation,” Chaturvedi added.

NUCFDC, which obtained its licence to operate as a mid-layer NBFC in February 2024, also expects to commence its fund-based services, including loans, later this financial year once its capital base exceeds ₹300 crore. This will allow the corporation to leverage its capital up to seven times to raise funds supporting IT infrastructure upgrades among the UCB network and meet its capital needs for onward lending. It is assessing the amount it will need to raise from the market next year.

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“Going forward, raising funds from other sources-equity, debt, or other instruments-will be examined. But presently, our focus is on providing non-fund-based support systems to UCBs. We are developing IT capabilities, digital infrastructure, and a central platform that includes hardware, applications, cybersecurity, manpower, and maintenance-all bundled to support these banks,” Chaturvedi explained.

As part of its digital initiative for the sector, NUCFDC has launched two digital solutions-Sahakar Digipay and Sahakar Digiloan. These purpose-built solutions aim to strengthen payment infrastructure and automate lending operations across UCBs. This initiative aligns with NUCFDC's broader strategy to foster digital transformation, operational efficiency, and customer-centric innovation within the UCB ecosystem at an affordable cost.

Digital push

Chaturvedi mentioned that the cost of operating Sahakar Digipay could be as low as 50 paisa per transaction for all UCBs, making it even cheaper than UPI for service providers. He believes this will encourage wider acceptance among UCBs and promote digitisation of payments across cooperative banks. The system is also interoperable with NPCI systems like UPI, IMPS, and RuPay on the backend, aiding in modernising UCB operations and helping them serve a new generation of tech-savvy customers.

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NUCFDC also plans to seek RBI approval to allow digital banking services by UCBs with a net worth below ₹50 crore, provided such banks are part of the central infrastructure supplied by NUCFDC with robust cybersecurity features.

Chaturvedi indicated that several other products are under development to support the sector's digital transformation and will be launched in phases as UCBs continue their efforts to promote financial inclusion. The plans also include AI-supported services and data analytics to further strengthen the financial resilience of UCBs.

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