NAFCUB Urges UCBs to Boost MSME Lending, Focus on Economic Growth

At the 48th Annual General Meeting (AGM) of the National Federation of Urban Cooperative Banks and Credit Societies (NAFCUB), held at the NCUI headquarters in Delhi, H.K. Patil, Chairman Emeritus and senior cooperator, encouraged urban cooperative banks (UCBs) to shift their focus towards supporting Micro, Small, and Medium Enterprises (MSMEs). Patil emphasized the need for UCBs to shed their conservative lending practices and prioritize financing MSMEs to drive economic growth.

Patil noted that UCBs often show reluctance in lending to businesses, especially when it comes to MSMEs, which are the backbone of India’s economy. He pointed out that MSMEs, which contribute 30% to the GDP and generate employment for over 9 crore people, are essential for national economic progress. Patil stressed that supporting MSMEs would ultimately fuel the growth of UCBs themselves.

He highlighted that UCBs have made strides in aligning with MSME growth, with 45% of their advances now directed towards this sector. This shift has even been recognized by the Reserve Bank of India (RBI), demonstrating the crucial role of UCBs in fostering the MSME ecosystem. Patil praised the 63 million MSME units in India, emphasizing their importance in boosting job creation and economic stability.

During the AGM, Patil also discussed the operationalization of the long-anticipated Umbrella Organization (UO), which aims to provide UCBs with professional advisory services, advanced IT solutions, and business scaling opportunities. He encouraged UCBs to contribute to the UO, noting that ₹125 crore has already been collected in share capital, with a target of reaching ₹300 crore in the coming months.

Patil emphasized that the UO will enhance UCBs’ ability to remain competitive by adopting innovative business strategies, expanding their operations, and leveraging economies of scale. However, he expressed disappointment that only a fraction of UCBs have contributed meaningfully to the UO and urged greater participation.

Supporting Cooperation Minister Amit Shah’s vision of having one UCB in each town, Patil called for further expansion of UCBs to serve diverse social groups. He pointed out that similar initiatives have already succeeded in states like Karnataka and Gujarat.

Patil also recognized the efforts of NAFCUB Chairman Laxmi Dass, praising his leadership in organizing workshops across the country. He noted that these workshops are instrumental in addressing the challenges faced by UCBs and enhancing their capacity to support MSMEs.

In addition, Patil thanked Union Minister Amit Shah for resolving several longstanding issues affecting UCBs. However, he acknowledged that some matters remain unresolved and assured that ongoing discussions with the Ministry and RBI aim to address them.

Patil concluded by listing key demands for UCBs, including simplifying the bank licensing process, removing restrictions on small-value loans, and ensuring that UCB licenses are not revoked arbitrarily. He emphasized the need for a collaborative approach between UCBs, policymakers, and regulatory bodies to ensure continued growth and support for MSMEs.

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