In one of our earlier issues, we identified the regional rural banks (RRBs) and cooperative banks as one of the seven hottest micro-verticals. While RRBs have traditionally gone by the parent banks recommendations in most technology deployment, cooperative banks present an interesting story, as each one is different from the other. It remains a challenge for most vendors to understand the needs, let alone address them.

So, what do these banks see as technology priorities? When Dataquest tried to study the space, there was no better place than InfraManch, the annual customer meet of InfrasoftTech, the leading vendor of core banking solutions for these banks. The meet, which probably is the largest get-together of CXOs from the Indian co-operative banks, of all sizes, was marked by discussions around business challenges, opportunities and technology challenges faced by the community.

The challenges that were highlighted: smaller banks do not see standardized & well-known software packages and standard hardware vendors, as a business case because of cost constraints; co-operative banks which are away from city centers have grave issues of continuous power supply required for technology implementation; lack of IT trained/IT conversant HR is a issue for co-operative banks to take the big leap in technology; most banks are vary of undertaking business process re-engineering without which automation is not useful. Hence their expectation on customization, software rework, etc, is very high.

In addition, a major challenge is that in many cases decisions are taken by the board members, many of which are not well-informed. While by and large the segment is under-penetrated, interesting technology models also came to the limelight during the event. Thane Janata Sahakari Bank, a large cooperative bank in Thane, Maharashtra, actually provides core banking as an ASP service to other banks. The core banking solution is licensed from InfrasoftTech. Another large coopSaraswat Coop Bankhas started marketing a core banking solution, based on Infrasofts product. Another bank revealed a story of operating in a location, powered completely by solar power.

The event marked extremely useful discussions on how the cooperative banks could play a more active role in the governments plan of financial inclusion. The chairmen and CEOs of most co-operative banks are inclined to work on the financial inclusion objectives of the government. Their contention is that the UCBs understand the psyche of unbanked population and small customers and can provide right support to them.

But traditionally, co-op banks have played where others have not been able to enter because of lack of knowledge about customers/potential customers. A few executives present feared that Unique ID will make it easier for the larger banks to get into the turf of coop banks, as they would now have all the info.

by Shyamanuja Das

But most felt that information is not the only advantage that cooperative banks had over nationalized and larger banks. Cooperative banks thrive on loyal customer base that is now offered the same facilities that private banks and nationalized banks provide to customers.