Corporate governance in Urban Co-Operative Banks: An Indian perspective

Urban co-operative banking sector is an important constituent of Multi Agency system operation in the country. They essentially cater to the credit needs of persons of small means. The Reserve Bank of India in its annual report on trend and progress in banking, state that urban banks are purveyor of credit to small borrowers and weaker section of the society, but it is not coming out with any supportive policies that will strengthen the role of USB. Although some UCBs have been shown remarkable in the recent years, still a large number of banks have shown measurable performance. The operational efficiency is unsatisfactory and characterized by low profitability, ever growing non-performing assets (NPA) and relatively low capital base. The organization is now at cross road. Prolonged sickness in most of the USB loose customers confidence and the society at large. One of the most disturbing features of this moment is that it is increasingly passing into the hands of nasty politicians, who misuses their position with undue interference. Probably the biggest challenge facing the banking sector, especially the UCBs, is proper corporate governance. A co-operative bank is cooperative first and then bank. Co-operative Bank needs to remain profitable within co-operative framework. It has to carefully blend business expediency and co-operative values. Co-operative governance implies rules, tools and the concrete procedures through which co-operative are managed. The governance must be consistent with the values, principles and the mission of credit co-operatives, in order to allow for their correct implementation. In this background a modest attempt has been made to study the implementation of Corporate Governance of Urban Cooperative Banks in India.