Flagship Research Quarterly of the Indian School of Business (ISB). Find out more

Sign up  |  Log in

Past Issue • Jul-Sep 2011

The Role of Urban Cooperative Banks in Financial Inclusion

What is the future of Urban Cooperative Banks (UCBs) in the sphere of commercial banking institutions? This article discusses the advantages that UCBs have over conventional banks as well as the challenges they need to overcome to elevate their status and promote financial inclusion.

Mention Urban Cooperative Banks (UCBs) in corporate circles or even public sector commercial banking and chances are that you will evoke a smirk of dismissal. There are over 1,650 UCBs with close to 7,000 branches in the country. Yet they form a tiny part of the banking system accounting for less than 3% of the total banking assets and deposits and less than 3.5% of total advances. They also follow the 80-20 rule to the “T”. The top 20% of UCBs account for almost exactly 80% of its deposits. In spite of being present in 25 states, much (almost 80%) of the action happens in the five states of Gujarat, Maharashtra, Andhra Pradesh, Karnataka and Tamil Nadu – with the lion’s share going to Maharashtra. As on March 31, 2010, the state accounted for over a third of all UCBs, almost half of all UCB branches, around 60% of total extension counters of UCBs and more than 85% of all its automated teller machines (ATMs). Accordingly, more than 60% of the total banking business of the UCB sector was concentrated there but their numbers have been dwindling in recent years. During 2000-2010, 132 banks had their licenses cancelled and 62 merged with other banks. In this scenario, it is perhaps understandable why this sector does not exactly steal the limelight in banking policy discussions.


  • Rajesh-Chakrabarti

    Rajesh Chakrabarti

    Clinical Associate Professor of Public Policy and Executive Director of the Bharti Institute of Public Policy at the Indian School of Business (ISB).
Scroll To Top