Role and Importance of Urban Co-operative Banks

Urban co-operative banks occupy a small but valuable place in the country's banking system. Their special role lies in serving the sections of the urban population that the big banks long ignored, and in keeping the co-operative spirit alive in the towns. Their chief contributions are:

• Mobilising the savings of the urban middle class — By offering safe, convenient deposits close to home, UCBs draw out the small savings of townspeople and turn idle money into a useful pool for lending, at the same time building the saving habit (thrift).
• Providing cheap credit to small borrowers — Their loans go mainly to small traders, artisans, self-employed persons, small-scale industries and salaried people, on simpler terms than big banks demand, freeing such borrowers from high-cost private finance.
• Encouraging small business and self-employment — By financing shopkeepers, craftsmen, transport operators and tiny enterprises, UCBs support local trade and industry and help generate employment in the town.
• Promoting financial inclusion — They carry banking to persons and localities that commercial banks may find unprofitable, bringing the ordinary town-dweller and small entrepreneur into the banking fold.
• Personal, local and prompt service — Being small and rooted in the locality, a UCB knows its customers personally, understands local needs, and can decide and disburse loans quickly with less red tape.
• Fostering the co-operative movement — As member-owned, democratically run bodies, UCBs spread the values of self-help, mutual help and thrift in urban areas, complementing the rural co-operative structure.
• Contributing to balanced local development — By keeping the community's savings working within the community, they help develop the local economy rather than draining resources away to larger centres.