Nabard to set up common core banking infrastructure for rural banks

KOLKATA: National Bank for Agriculture & Rural Development, or Nabard, has decided to create a common core banking infrastructure for rural co-operative banks, which have been losing out heavily in competition to commercial banks in the absence of modern banking facilities in their bouquet.

The development bank, which regulates rural credit cooperative banks, is even contemplating floating a subsidiary or a separate division to carry this endeavour forward . This plan constitutes a part of Nabard's repositioning exercise, which has been on for quite some time.

“Our effort aims at creating a level-playing field for cooperative banks in terms of modern banking solution. Except for some stray attempts , most of these banks do not have a CBS platform,” Nabard executive director Prakash Bakshi told ET.

The country has a multi-tier rural co-operative credit structure with 31 state co-operative banks at the top across states and some 370 central co-operative banks below them. They are active in small towns and the interiors and cater mostly to the poorer section of the population. These banks control around 85% of the co-operative credit in the country.

But as they fail to retain old depositors due to the lack of modern banking facilities, it becomes difficult for them to sustain the growing farm loan demand. This has prompted Nabard to step in.

Under this initiative, Nabard will engage a common service provider for CBS implementation in participating banks and build a common data centre and a disaster recovery centre for them.

“As we would aggregate the demand for CBS, the cost of engaging a service provider and building data centres will get reduced ,” Mr Bakshi said. Nabard has decided to shoulder the initial burden for building the CBS infrastructure .

However, banks willing to participate will have to cough up Rs 10,000 per branch as earnest deposits and they would need to pay for using the new CBS platform later on.

Nabard has written to all its constituents to join hands in this endeavour . “Banks with existing CBS platform can also switch to our platform,” said Mr Bakshi, who expects this scheme to get a concrete shape by July this year.

It has started a search for engaging a COO and a chief risk officer for the project.

The CEO will be responsible for the planning, execution and supervision of CBS implementation across co-operative banks participating in this scheme.