Unravelling the Tapestry of Urban Cooperative Bank Failures: An Interpretive Structural Modelling Approach

The financial system in India has exhibited a predominantly resilient nature, with no significant instances of commercial bank failures. Despite being regulated, numerous instances of failure have been observed among urban cooperative banks (UCBs), causing substantial damages to depositors and other stakeholders. The main objective of this research is to determine and investigate the contextual association between the variables that account for the failure of the UCBs in India. The study utilized the interpretive structural modelling (ISM) framework to gain a deeper comprehension of the fundamental factors leading to UCBs’ failure. This was achieved by constructing a comprehensive multilevel structural model, incorporating the insights and expertise of domain experts. Utilizing the MICMAC analysis methodology, the various factors were categorized into four distinct groups: autonomous, linkage, dependent, and independent variables. These groups have been formed by conducting a comprehensive evaluation of the factors’ interdependencies and their respective driving power within the research context. The result of the research indicates that the factors such as lack of professionalism and skills, political interference, inadequate member participation, and governance issues and frauds hold significant importance and warrant focused attention from authorities to enhance the overall performance of the UCBs. The findings will assist bank managers in identifying the primary factors contributing to their failures, thereby enabling effective monitoring measures to be implemented to prevent any future occurrences of failure among UCBs in India.