The Reserve Bank of India has first time granted an “in-principle” approval to a multi-state urban co-operative bank (UCBs) -Shivalik Mercantile Co-operative Bank Limited- to transition into a Small Finance Bank (SFB).
- UP head-quartered Shivalik Mercantile Co-operative Bank has business operations in Uttar Pradesh, Uttarakhand and Madhya Pradesh.
- It has a total business size of Rs 1766 crore crore and a net worth of Rs 77 crore as of March, 2019.
- The “in-principle” approval granted will be valid for 18 months to enable the applicant to comply with the requirements under the scheme.
- In September 2018, the RBI had allowed better performing UCBs to convert into Small Finance Banks subject some conditions.
- The Small Finance Bank has to start operations with a minimum net worth of Rs 100 crore and minimum promoters’ contribution of 26% of the paid-up equity capital.
- The High Powered Committee on Urban Cooperative Banks (UCB), chaired by Shri R. Gandhi, the then Deputy Governor of Reserve Bank, had, inter alia, recommended the voluntary conversion of large Multi-State UCBs into Joint Stock Companies and other UCBs which meet certain criteria into Small Finance Banks (SFBs).
About Small Finance Banks
- The RBI had issued guidelines for small finance banks in 2014.
- The main objective behind having small finance banks is to expand access to financial services in rural and semi-urban areas.
- These banks can do almost everything that a normal commercial bank can do, but at a much smaller scale.
- These banks offer basic banking services, accept deposits and lend to underserved sections of customers, including small business units, small and marginal farmers, micro and small industries, and even entities in the unorganised sector.
