India’s Urban Cooperative Banks (UCBs) are poised for a digital leap, emerging as key players in the country’s inclusive financial growth journey, as highlighted in the inaugural Sahakaar Trends report by the National Urban Cooperative Finance and Development Corporation (NUCFDC) and TransUnion CIBIL.
Unveiled at the 2025 Credit Conference, the report offers a sweeping view of UCBs’ transformation, showcasing robust portfolio growth, improved asset quality, and a strategic pivot toward tech-led modernization.
As of March 2025, UCBs’ total portfolio balances stood at Rs 2.9 lakh crore, up 6% year-on-year and marking a 1.8x increase since 2020. Major lending categories such as housing, personal, gold, and auto loans recorded double-digit compound annual growth rates (CAGRs), driven by increased borrower demand and deeper market penetration.
UCBs are now serving around 9 crore individuals, particularly in small towns and semi-urban India, strengthening their identity as community-rooted institutions extending credit to the underserved.
The sector’s resilience is evident in its improved financial metrics. The RBI’s latest Financial Stability Report confirms that credit growth among primary UCBs has climbed to 7.4% YoY, with a healthy Capital to Risk-Weighted Assets Ratio (CRAR) of 18%. Gross NPAs have declined to 6.1%, while net NPAs have sharply dropped to just 0.6%.
These improvements, combined with renewed lending activity by both Scheduled and Non-Scheduled UCBs, signal a phase of stability and readiness for innovation.
The report stresses that digital transformation is the sector’s next big opportunity. While legacy systems pose constraints, targeted initiatives such as the Sahakar Credit Engine, Sahakar Paathshaala, and portfolio risk dashboards aim to usher in a new era of real-time loan processing, Aadhaar-linked services, app-based lending, and automated credit monitoring. Alongside tech upgrades, staff training and better risk management frameworks will help UCBs expand operations, boost efficiency, and elevate customer experiences.
Segment-wise, commercial loans continue to hold the largest share at 28%, though growing modestly at 3% CAGR. Housing loans have grown at a 19% CAGR, now comprising 14% of the portfolio, while personal loans clocked an 18% CAGR and gold loans surged at 52%, albeit from a smaller base. Retail business loans, driven by MSMEs and informal enterprises, are also expanding at a strong 24% CAGR, showing rising trust among urban micro-entrepreneurs.
Notably, UCBs are proving effective in onboarding new-to-credit (NTC) borrowers, with 37% of commercial loan applicants falling into this category. Among borrowers with less than Rs 1 crore in exposure, delinquency has dropped from 3.5% in 2020 to 1.4% in 2025, outperforming PSU banks.
Similarly, UCBs narrowed delinquency gaps in the Rs 1–10 crore bracket, while maintaining low-risk profiles in housing finance. Housing loan enquiries rose 2.8x in five years, outpacing HFCs, with women accounting for 71% of UCB housing borrowers, a remarkable marker of gender inclusion.
The Sahakaar Trends report concludes that with the right digital infrastructure, policy support, and forward-looking strategies, UCBs are not just ready to scale, they are ready to lead. Their combination of trust, technology, and grassroots connection could redefine the contours of inclusive banking in India’s $5 trillion economy vision.
