Building Trust and Technology: A Strategic Move Toward Sustainable Cooperative Banking in Uttar Pradesh

Richa Mittal*

Cooperative banks have historically been the backbone of India’s rural and semi-urban financial infrastructure, providing credit to farmers, small traders, and cooperative societies. In Uttar Pradesh, the cooperative banking network — comprising the Uttar Pradesh Cooperative Bank (UPCB), 50 District Cooperative Banks, and 1,260 branches — has been pivotal in maintaining the flow of credit for agricultural development and inclusive growth. However, despite their reach and social importance, cooperative banks continue to struggle in competing with commercial banks due to weak capitalization, limited digital reach, and lack of mandatory engagement by cooperative institutions themselves. Uttar Pradesh has witnessed a remarkable turnaround in the performance of its cooperative banking sector. As reported by Business Standard (2024), the Uttar Pradesh Cooperative Bank (UPCB) has achieved a Credit-Deposit (CD) ratio of over 72%, outpacing the state’s overall banking sector average of 61%. Chief Minister Yogi Adityanath emphasized that this growth reflects the government’s proactive measures for last-mile financial inclusion and the revival of cooperative institutions that were once on the verge of collapse before 2017.

To sustain this momentum, the Government of Uttar Pradesh should take inspiration from the Delhi model and recommend that all cooperative departments, housing boards, and cooperative societies in the state open and operate their bank accounts with cooperative banks. This would not only demonstrate faith in the cooperative banking structure but also help increase its operational scale and credibility.

Mandating Cooperative Transactions: A Step Towards Self-Reliance

To strengthen the cooperative banking ecosystem, it is essential to make all financial transactions of registered cooperative housing societies, agricultural cooperatives, and other cooperative bodies under the Ministry of Cooperatives mandatory through cooperative banks. Presently, most housing cooperative societies and institutions prefer commercial banks for convenience, resulting in a diversion of cooperative funds outside the cooperative financial framework.

Routing such transactions through cooperative banks will:

• • Increase the deposit base and liquidity of these banks,

• Enhance transparency and accountability,
• Build trust and participation among cooperative members, and
• Ensure that the cooperative movement is financially self-sustaining.

Delhi’s Initiative: A Model of Confidence and Reform

In Delhi, Cooperation Minister Ravinder Indraj Singh recently announced a landmark policy aimed at restoring confidence in the cooperative banking sector. Under this initiative:

• Bank accounts of all ministers, officers, and employees of the Cooperation Department are to be opened in cooperative banks.
• New cooperative bank branches are being planned across Delhi, especially in rural and rehabilitation colonies, to promote financial inclusion.
• Public awareness and trust-building campaigns are being organized to encourage citizens to open accounts and avail of cooperative banking services.

This strategic move not only enhances the deposit base of cooperative banks but also sends a strong message of government trust and institutional participation. Uttar Pradesh can emulate this model by mandating similar financial integration for its cooperative institutions and employees.

Addressing Structural and Regulatory Challenges

While cooperative banks serve a vital developmental function, they often face systemic weaknesses. RBI data indicates that the number of Urban Cooperative Banks (UCBs) declined from 1,926 in 2004 to 1,551 in 2018 due to failures, mergers, and poor governance. Their small capital base—only ₹25 lakh for many UCBs compared to ₹100 crore for small finance banks—restricts their capacity to expand. Moreover, weak internal controls and politically influenced management have further eroded public confidence.

To mitigate these challenges, the following measures are critical:

1. Capital Augmentation: Introduce state-level capital support schemes and allow societies to contribute to share capital of cooperative banks.
2. Digital Integration: Link cooperative banks with UPI, RuPay, BHIM, and mobile banking systems to provide real-time services comparable to commercial banks.
3. Professional Governance: Recruit qualified banking professionals and limit political appointments to improve decision-making and accountability.
4. Regulatory Oversight: Strengthen dual control by the RBI and the State Registrar of Cooperative Societies, ensuring regular audits and compliance.
5. Customer-Centric Schemes: Introduce savings incentives, low-interest agricultural loans, and small business finance to attract deposits and borrowers.

Building Confidence Through Compulsory Engagement

Public trust in cooperative banks can be restored only when cooperative members and government institutions themselves lead by example. All cooperative housing societies, agricultural federations, and state departments under the cooperative framework should mandatorily open and operate accounts in cooperative banks. This will serve as a visible commitment to the cooperative vision of self-help and collective prosperity.

The future of cooperative banking in India depends on a balanced blend of policy intervention, digital modernization, and public trust. By adopting the Delhi model and ensuring that cooperative societies in Uttar Pradesh channel their transactions through cooperative banks, the state can significantly enhance the sector’s viability and competitiveness. A strengthened cooperative banking system will not only expand credit access for rural and low-income groups but also reinforce India’s long-standing commitment to inclusive and participatory economic development.

References

1. Government of Uttar Pradesh – Department of Cooperatives. Cooperative Banks in Uttar Pradesh. https://cooperativeup.gov.in/StaticPages/Cop_SocietyPCB.aspx
2. Business Standard. (2024, April 2). UP Co-operative Bank outpaces commercial lenders in loans, advances. https://www.business-standard.com/finance/news/up-co-operative-bank-outpaces-commercial-lenders-in-loans-advances-125040200856_1.html
3. Reserve Bank of India (2018). Report on Trend and Progress of Banking in India.
4. Government of NCT of Delhi. Cooperation Department Press Briefing: Minister Ravinder Indraj Singh’s Announcements on Cooperative Banking Reforms (2025). https://www.indiancooperative.com/featured/delhi-nagarik-sah-bank-agm-minister-vows-major-co-op-push-for-state/

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(*Richa Mittal, Advocate Delhi High Court, is a distinguished professional with a multifaceted background as an economist and advocate practicing at the Delhi High Court. Her extensive expertise in both the legal and economic domains has positioned her as a leading authority in navigating the intricate intersection of law and economics. With a profound commitment to justice and a keen analytical mind, Richa has made remarkable contributions to the legal and economic landscape in India. Email: advocatericha80@gmail.com)