Blueprints of Strategy – An Empirical Study of Business Models in Rural Cooperative Banks

This study explores the business models of hybrid institutions, rural cooperative banks in India which balance the dual primary tasks of cooperation and welfare with profit-making. We undertake an exploratory analysis of 351 Central Cooperative Banks (CCBs)in India from 2015 to 2021 by clustering the variables derived from their financial statements. We consider these variables to be representative of the managerial choices of these institutions in their quest for optimum performance in the given environment. We delineate three business models from the clusters: Retail Funded Investment Oriented, Retail Funded Traditional Lending and Wholesale Funded Traditional Lending. We study their risk profile and delve into the inherent heuristics-based logic of each model to understand the institutions' realized strategy. We then enquire into the changes in the business models with time and find a new business model component based on trading in securities to be emerging. A business model canvas mapping of key resources, activities, partners, channels and value propositions provides deeper insights into the models. Our study mobilizes the contextual differentiator of rural cooperative banks. This research substantiates that cooperative banks, while balancing dual missions, adopt different business models and give insights into how they do it while managing the risks involved and how the same changes over time. It contributes to the business model literature by suggesting new typologies of business models adopted by hybrid institutions in rural hinterlands of a developing economy. It offers recommendations for policymakers, supervisory authorities and practitioners.