Urban Cooperative Banks need support in Telangana

Urban Cooperative Banks (UCBs) play a critical role in meeting credit needs of MSME businesses. The reach of UCBs is deeper for smaller units within MSMEs. UCBs promote local and member centric banking which is very essential to promote savings and cooperative contributions besides mere commercial credit transactions. It is unfortunate that the healthy UCBs are also apprehended due to the errant deeds of few UCBs. It is a fact that more capacity building is required for UCBs.

While certain media reports project UCBs in dark light due to the non-performing assets (NPAs), malpractices, low adoption of technology, etc., the fact remains that UCBs are not inferior or alone in such risks or practices. Those are systemic risks for the entire banking sector and not alone to UCBs. In India, after Maharashtra and Gujarat states, Telangana is at the forefront in cooperative banking. Telangana was part of the region in the pre-1990s era where cooperative credit concept emerged.

Further, Telangana is among few states where UCBs have an exclusive federation. Telangana State Co‑operative & Urban Banks Federation (TESCUB FED) provides membership for the UCBs, collects data, disseminates guidelines, builds capacities, and promotes healthy cooperative banking. As TESCUB Fed is about to turn 25 years in 2027, it has earned respectable achievements to its credit. At its peak, Telangana had 75 UCBs. As at March 2026, the number of UCBs in Telangana is reduced to 48.

The total capital of Telangana UCBs is close to Rs. 500 cr. Their total business crossed Rs. 20,000 cr. They have 400 branches and more than 400 ATMs or cash dispensing machines. In terms of profitability and growth, the leading UCBs in Telangana are Gayatri Bank, Vardhaman Mahila Bank, Pochampally Bank, Sudha Bank, Stambadri Bank and Sri Gayatri Bank. Particularly, Pochampally village is not only popular for being World Heritage Site and for Ikat sarees, it is also popular for having headquarters of Pochampally Bank. Its stable growth and best management practices earned several awards and appreciation.  

The gross NPAs of Telangana UCBs are Rs. 162 cr, being 1.89% but are significantly lower than average NPAs of total Indian banking sector. The thin profit of 0.20% on the total business coupled with the lower net interest margins indicate good utilization of resources and passing on the benefit of lower intermediation costs to the deposit holders and the borrowers. Disregarding few failures which created intermediate trust issues, the cooperative journey in Telangana has been very productive and has been supporting MSMEs, entrepreneurs, and members with good returns.

With such strong cooperative culture, huge credit network, and 1 crore customer base, it is imperative that UCBs in Telangana needs enhanced governance, and policy support. The government support should include capital contributions, government deposits, government business, partnership in government schemes, and promotion in government publications.

- Dr. Kishore Nuthalapati

(Dr. Kishore Nuthalapati is an Economist and a Corporate Finance Professional. He is the Regional Director of PRMIA, US for Hyderabad Chapter covering Telangana and Andhra Pradesh in India. He is serving as the CFO of BEKEM Infra Projects Pvt Ltd, Hyderabad.)