The collapse of the Punjab and Maharashtra Cooperative Bank in 2019 raised questions about the dependability of the urban cooperative banking system in India. Started as a movement to address issues of rural credit, cooperative banks have witnessed a substantial increase in their scope of operations and have played a significant role in increasing liquidity in the hands of lower- and middle-class people. However, the misconduct of a few banks has maligned the entire urban cooperative banking system, leading to decreasing depositor trust. These instances cannot be allowed to demean the efforts put in by these banks in attaining the aims of financial inclusion, specifically with respect to the role played by them in the priority sector advances. This paper examines the problems faced by urban cooperative banks and analyses their future potential against the backdrop of their historical performance in financial inclusion. Also, it examines the various reform measures taken by the Reserve Bank of India in tandem with government efforts to keep the dependability and viability of the sector intact.
