Cooperative banking sector – A new awakening

For a long time, the cooperative banking sector in India has represented the quintessential cooperative culture with an easy pace and very basic service. With the advent of computerization in the late 80’s and 90’s, like the nationalized banks, the cooperative banks had to adapt to a change in the work culture. As in every other business or industry, the pace of work and the expectations of the customers grew rapidly. Use of technology became mandatory for achieving the new norms of speed of service, quality of service and indeed the amount of service demanded by the customers.

However, technology brought with itself certain hitherto unknown threats to the safety and security of the money, which necessitated a strict discipline in working as well as deployment of security measures, also based on technology. On the one hand, banking activity increased in its reach and need far and wide into the geography of the nation because of a growing economy, addition of a plethora of new services and products, integrating them with the core banking system and linking all the branches of the bank seamlessly required a lot of sophistication in dealing with not just operational issues of the technology but tackling the menace of hackers as well.

It took time for the cooperative sector to be able to attract technical talent, especially in rural areas, where many of these banks are headquartered. Even on the management side, they faced many challenges in coping up with technological advances and the demands of newer banking channels like credit and debit cards, ATMs and ATM cards. To educate the mostly rural customer base in general they needed help which came from the apex bank, the nationalized banks and the new entrants in the private sector as it was in the interest of the sector as a whole. The process was lengthy no doubt. 

Today, when the rogue hackers abound in the world waiting to take advantage of the ignorance or lack of expertise even in more sophisticated regions, cooperative sector was the most vulnerable to their attacks. Albeit a little sluggish initially, the cooperative banks are responding to the situation fast, especially after the infamous Cosmos Bank case in the recent past. A lot needs to be done yet though because, many cooperative banks still use Gmail by Google as the default mailing system even for the most sensitive and important communications. With the System Audit as a branch of security management becoming very important, a lot of individuals and companies in this space are doing their best to help the cooperative banking sector gear up to meet the technological challenges through discipline and precautions. The entire banking sector has now united to fight the hacking menace. The case in point is recovery of Rs. 20 lakhs fraudulently diverted by some hackers to their accounts from the account of a major cooperative bank. As soon as the fraud was known, the entire chain of banks involved in the particular transaction sprang into action and the entire amount was recovered.

As mentioned earlier, a lot has happened but a lot more needs to happen in the area of security of the systems used in banking, in the cooperative banking sector. Security education from top to bottom in every bank needs to be an ongoing activity and not a onetime action. Besides the banking staff, there is enough scope even in the customer education, as far as cooperative banks are concerned. Some basic discipline in terms of using electronic communication and various cards is highly required. 

Equally important thing is the change required in the outlook towards investment in security systems, implementation of suggestions and recommendations of the security experts and basically, compliance with the rules and regulations in this regard as set out in the law and as notified by the RBI from time to time. All the cooperative banks must understand that in terms of security there can be no excuses because even the slightest indiscretion can cost the bank in lakhs of rupees besides the reputation. Policy guidelines governing the business have to be sacrosanct and must be strictly adhered to.

The good news is, slowly but surely, the cooperative banking sector has started moving on the right path and one can hope to see many positive developments in near future.

Mr. Ajay Nikumb