Under RBI approval Shivalik Mercantile Bank, an Urban Co-operative Bank is getting converted into a Small Finance Bank.
- This is the first such approval after RBI came up with a scheme of VOLUNTARY TRANSITION OF UCB INTO SFB in September 2018.
- RBI has further added that the inprinciple approval is valid for a period of 18 months to enable Shivalik Mercantile Bank which is a multi-state UCB to comply with the requirement under the scheme the guidelines for ONTAP licensing of SFBs in the Private Sector and fulfill other conditions stipulated therein.
- RBI is encouraging such conversions in order to overcome the dual regulation. RBI is the supervisor of their activities and the Registrar of Co-operative societies (State/Central) has jurisdiction over their incorporation, registration, management, amalgamation, merger and liquidation among others.
- This is required to be done by RBI vested with the powers under the broader banking reforms to improve credit lending and reduce fraudulent lending.
About the Bank:
- Shivalik Mercantile Co-operative Bank went into business in 1997 in Saharanpur District of Uttar Pradesh.
- The annual report as of 2019 reads that the bank had 31 branches and 57 ATMs spread across six clusters in three states viz Uttarpradesh, NCR and Madhyapradesh.
- The deposits of the bank as of March 2019 was Rs.1051.20 crores and Rs. 953.40 crores as of March 2018.
- The advances for the corresponding period was Rs. 715.24 and Rs. 611.61 crore respectively.
- The profit reported by the bank for 2019 and 2018 were Rs.3.85 and Rs.3.17 crore respectively.
- Note: UCBs with a minimum net worth of Rs. 50 crore and maintaining capital to risk weighted assets ratio of 9% and above are eligible to apply for voluntary transition of SFB under RBI scheme.
- The minimum net worth of the proposed SFB should be Rs. 100 crores from date of commencement of business. Other conditions are:
- They should maintain a minimum capital adequacy ratio of 15% of its risk weighted Assets (RWA) on a continuous basis the availability of adequate capital should be ensured.
- Promoters should maintain atleast 26% of the paid up equity capital.