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:

  1. Shivalik Mercantile Co-operative Bank went into business in 1997 in Saharanpur District of Uttar Pradesh.
  2. 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.
  3. The deposits of the bank as of March 2019 was Rs.1051.20 crores and Rs. 953.40 crores as of March 2018.
  4. The advances for the corresponding period was Rs. 715.24 and Rs. 611.61 crore respectively.
  5. The profit reported by the bank for 2019 and 2018 were Rs.3.85 and Rs.3.17 crore respectively.
  6. 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.
  7. 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.

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