An Empirical Evaluation of Business Model and Positioning of Primary (Urban) Cooperative Banks in India

We explore the predilections and approaches of Primary (Urban) Cooperative Banks (UCBs) regarding their business models and positioning. We also examine the relationship between choices of UCBs about their business model and positioning vis. a vis. their key financial parameters. The analysis shows that even though there is awareness amongst UCBs regarding various facets of their business model and positioning, there is lack of coherence and direction regarding these aspects. Based on the preference of UCBs, we identify top five differentiation strategies, namely, better customer connect with personalized services, easy documentation, facilitation and handholding, strong cooperative linkage through various extension initiatives, product customization, and easy credit appraisal process. Our analysis suggests that instead of emulating and following the commercial banking models, UCBs have ample scope, albeit not in terms of the scale of finance, to present an alternative and inclusive model of banking for the weaker sections, women, and small businesses by adopting a four-pronged strategy, namely, stay local, know your differentiators, look beyond the funding, and make your own business models. Based on the above, UCBs can leverage their inherent strengths and with suitable business models, right positioning, and good governance systems can offer an effective alternative model for banking and inclusive finance