While a large section of the financially excluded population inhabits the rural areas, some of the unbanked populace resides in urban and semi-urban areas as well. With this the scope of financial inclusion is widening and therefore fuelling up the demand of the cooperatives banks, says Pramod Karnad, Managing Director, Maharashtra State Cooperative Bank Ltd (MSCB), in conversation with Rakesh Roy of Elets News Network (ENN). Excerpts:
What role did the cooperative sector (banks) play in uplifting the social economy and financial inclusion of Maharashtra?
Maharashtra cooperative sector is very vibrant. Though the first cooperative bank was established in Gujarat in 1904 under the Bombay State; however, the pioneers were from Maharashtra. Today, 31 District Cooperative Central (DCC) Banks, more than 20,000 Primary Agricultural Credit Societies (PACS), 507 Primary Urban cooperative banks are working in Maharashtra. These cooperative banks are playing a significant role in the social inclusiveness and financial inclusion, mostly for the rural and semi-urban people of the state. Urban cooperative banks, District Cooperative Central Banks (DCCBs) have traditionally played an important role in mobilising resources from lower and middle-income groups and in providing direct finance to small entrepreneurs and traders.
What kind of challenges are being faced by cooperative banks?
After Narasimham Committee Recommendation and globalisation, the banking competition has increased in India. Foreign banks have started their operations in India. Public Sector Undertaking (PSU) and private banks have increased their presence in rural and semi-urban areas. The revenue generated by the cooperative banks is sourced from the agriculture term, crop loan, and short term loans, that have narrow margins. Therefore, these banks have gradually downgraded their Income Asset Recognition Norm, thus liable to Non Performing Assets (NPAs).
While a large section of the financially excluded population inhabits in rural areas, some of unbanked populace resides in urban and semi-urban areas as well. So the scope of financial exclusion is wide. Here, these cooperatives banks play a major role in addressing financial inclusion of the people, mainly farmers, small vendors, agricultural and industrial labourers, people engaged in unorganised sectors, the unemployed, women, and older.
One of the advantages of the cooperative banks is that it acquires consequent information about the local residents. Being an integral part of the community, these banks have an advantage over their commercial rivals in terms of having information both about upcoming business opportunities as well as borrower quality, which national-level banks have a hard time gathering.
Recently, these cooperative banks have increasingly started adopting the three-pronged financial inclusion strategies to compete with other PSU and private banks. They are adopting initiatives like corporate governance, risk assignment management, adopting digital technologies, and many more.
How has MSCB evolved its strategies and adopting new technologies in sync with the changing banking environment in the digital era?
Since 2011, we already have an active in core banking solution along with all the ancillary applications such as Treasury, anti-money laundering enabled with latest technology applications. MSCB is using online Human Resources Management System (HRMS) system for payroll and biometric attendance system. Our bank has adopted multi party video conferencing system that has enabled remote locations (RO) meeting among branch managers to have a review of the sale/business targets.
We have our own in-house data centre and Disaster recovery site (DR), equipped with CCTV’s cameras, Uninterruptible Power Supply (UPS) and Air Conditioners running 24/7 with support personnel in place. MSCB Bank has provided RUPAY cards with e-com enabled transactions and the cards are fully secured with Europay, MasterCard, and Visa (EMV) chips embossed on each cards. MSCB ATMs have been set up across regional locations for wide acceptance of cards based transactions in rural areas too.
Our bank has its own dynamic website which keeps on updating the recent changes in interest rates and other financial products. We have implemented Cheque Truncation System (CTS) for cheque clearance. Real Time Gross Settlement (RTGS) and National Electronics Funds Transfer System (NEFT) are also offered to the customers.
Further, we have recently launched the SHIKAR Mobile App which facilitates instant transfer of money through RTGS/NEFT and soon going live with Immediate Payment Service (IMPS). In our strategy to make banking system easier like other banks, we have planned to adopt Unified Payment Interface (UPI) in the coming phase and our bank will also participate in the BHIM App.
With an increase in digital transactions in the banking system, security issues have increased simultaneously. What measures MSCB has taken to safeguard the interest of its customers?
As far as the security aspects are concerned, we do periodic auditing to safeguard our Information Technology assets; bank is already going to appoint NABCONS (NABARD Consultancy Services) for information security audit services.
Our mobile banking channel is digitally encrypted with flow of traffic using encryption algorithm, we have appointed Application Service Provider (ASP) which is Payment Application Data Security Standard (PA-DSS) and Payment Card Industry Data Security Standard (PCI DSS) certified to secure our payment channel.
As a part of our roadmap and our consultant KPMG, we are going to implement Data Loss Prevention (DLP) and encryption.