Blueprints of strategy: an empirical study of business models in rural cooperative banks

Rural Cooperative Banks (RCBs) form a significant part of the Indian financial ecosystem, with 11% share in lending. However, their business models have been overlooked by researchers, who have mainly focused on commercial banks. This study addresses this novel research gap and explores the uncharted territory of the business models of these hybrid institutions, 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 gives insights into how they do it while managing the risks involved and how these 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 in assessing their profitability, risk profiles, and fine-tuning their strategies.