Financial Inclusion through Urban Cooperative Banks : Insights from Telangana – Economic and Political Weekly

Recently, in June 2021, Infosys unveiled a digital banking “software as a service,” offering it specifically for urban cooperative banks (UCBs). Earlier, in February 2021, the Reserve Bank of India (RBI) had announ­ced the setting up of an eight-member expert committee chaired by the former RBI deputy governor, N S Vishwanathan, to stren­gthen UCBs. The terms of reference of the committee includes taking stock of the regulatory measures pertaining to UCBs during the last five years, and identifying the key enablers and constraints faced by UCBs towards fulfilling their socio-economic objectives (RBI 2021a). The amendment to the Banking Regulation Act in September 2020, which brought UCBs under the direct supervision of RBI, has also recently met with opposition in a few states, such as Maharashtra. In light of these recent paradigm shifts pertaining to UCBs, it became imperative to provide some crucial insights into the extent of financial inclusion achieved by UCBs.

This study is based on a primary survey conducted in Telangana. The former unified state of Andhra Pradesh (AP) was one of the forerunners in implementing financial inclusion initiatives and had some measure of success. Following the state bifurcation, more than 50% of the UCBs from the former united AP are currently located in Telangana. In 2021, the urban population was estimated at 46.1% of the total population of Telangana, with Hyderabad occupying the lion’s share (Government of Telangana 2021). The aim of our study was to assess the performance of UCBs operating in Telangana, based on supply-side indicators of financial inclusion, and to provide some insights into their progress with regard to adoption of fintech (financial techno­logy) for banking services.