Urban co-op banks’ body to facilitate buying and selling of priority sector loans

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To catalyse “cooperation among cooperatives” and ensure that the urban co-operative bank (UCB) sector’s money remains within the sector, the National Urban Cooperative Finance and Development Corporation Ltd (NUCFDC) plans to facilitate buying and selling of priority sector loans (PSLs), and encourage larger UCBs to help mid and small sized ones with demat and foreign exchange services, among others.

NUCFDC received RBI’s certificate of registration in February 2024 and was inaugurated by Home Minister and Minister of Cooperation, Amit Shah in New Delhi on March 2. It will extend loans, refinance facilities, liquidity support, among others, to UCBs.

Prabhat Chaturvedi, CEO, emphasised that NUCFDC will provide various fund and non-fund based services to its member UCBs, and ensure that the sector’s money remains within the sector.

The corporation, which plans to apply to the RBI for recognition as a self-regulatory organisation (SRO) for UCBs, will also work to generate business opportunities for member UCBs.

“We will facilitate buying and selling of PSL (priority sector lending) loans within the UCB space. They may require support for buying/ selling a specific pool of loans,” Chaturvedi said.

PSL includes loans given by banks to sectors such as agriculture, MSMEs, export credit, education, housing, social infrastructure and renewable energy.

Also, large UCBs can get enhanced business opportunities. These banks can provide many facilities to mid and small sized UCBs.

“So, instead of mid and small sized UCBs depending on the private sector and other banks for services such as demat accounts, foreign exchange, etc., large UCBs can provide them the same,” he said.

Fund and non-fund activities

Chaturvedi observed that on the funds side, NUCFDC can take deposits from UCBs, give loans to them, offer refinance and augment their capital (by subscribing to their NCD and Tier-II issuances), and manage their treasury operations.

“On the non-funds side, we can upgrade their technology architecture and tech stack….the mid and smaller sized UCBs don’t have IT manpower. They can’t afford to attract specialised talent in the locations they are in,” he said.

So, the corporation, in its capacity as a non-banking finance company, can create a talent pool of banking IT specialists.

“We can attract talent. And the services of our banking IT specialists can be made available to these banks at a fractional cost, and on a sharing, pay-as-you-go basis.

“Non-fund based activities will also include IT, training and capacity building initiatives, creating shared services (for functions which can be outsourced) for finance & accounts, HR, etc, through a centralised unit,” Chaturvedi said.

Further, the corporation will support UCBs with services such as cybersecurity, data recovery, back-up and resiliency.

“So, we can create reliable infrastructure on a public or our own cloud, where we can host these banks’ data and provide them resiliency as a service or disaster recovery back-up,” the NUCFDC chief said.