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 bank's 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
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
coop-Saraswat Coop Bank-has started marketing a core banking solution, based on
Infrasoft's 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 government's 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.
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.