The cooperative sector has been devoid of many privileges and is always under the scrutiny of Reserve Bank of India (RBI). The reasons for this severity are their inadequate lending practices, rising NPA levels, political funding behind their operations and more.
As technology has been evolving and contributing to the developments in banking, cooperative banks are also looking forward to embracing it. After a prolonged wait, in early 2014, the Urban Cooperative Banks (UCBs) were granted permission from RBI to extend online banking to their customers but only with a ‘view only’ facility.
Furthermore, the State Cooperative Banks (StCBs) and District Central Cooperative banks (DCCBs) also requested permission to serve people with online banking services. The consent to offer internet banking to customers was finally granted to all cooperative banks by RBI on November 5, 2015.
Only the cooperative banks that have a full-fledged Core Banking Solution (CBS) implemented and have upgraded their systems to Internet Protocol Version 6 (IPv6) are eligible to provide non-transactional internet banking services to customers through this provision.
The list of non-transactional internet banking services include:
• Balance enquiry
• Account summary
• Account statement generation
• Chequebook request
• Updating personal details etc.
For initiating internet banking services, the UCBs are required to report to RBI, while StCBs and DCCBs should report to both RBI and NABARD.
In order to extend transactional facilities, cooperative banks must fulfil a many other rigid and non-negotiable guidelines defined by the RBI. Check out this image showcasing detailed information on the eligibility criteria.
The list of transactional facility features through internet banking include:
• Funds transfer (NEFT, IMPS, RTGS, UPI)
• Bill payments
• FD/RD account opening
• Standing instructions
• Loan and credit card applications etc.
The Present Scenario of Online Banking in Cooperative Banks
The cooperative banks in India serve over 60 Crore people for whom banking at a physical branch is the most popular channel. With digital banking catching momentum in the recent times, UCBs and other cooperative banks have been allowed to issue ATMs, debit cards and internet banking kits to customers. However, the hard reality states that 38% of the total UCBs are still not having a CBS installed for managing their daily banking operations. The customers associated with such banks are therefore not able to access digital medium of banking.
Major Challenges Cooperative Banks face in adopting Internet Banking
• The budget constraints: Not enough funds to procure the required software and hardware needed for internet banking.
• Poor penetration of desktop/PCs and smartphones: unfamiliarity among (rural) people about using these devices.
• Security concerns: Fear of malware/phishing attacks due to compromised security standards by the CBS implementation partners.
The Way Ahead
Cooperative banks must integrate with a CBS providers that can help them overcome challenges by hosting a dedicated data centre for their needs. They must gear up to embrace digital channels like online banking by associating with a partner that delivers customised, out-of-the-box banking solutions for improving customer experience and generating more business profits