The Reserve Bank of India (RBI) granted ‘in-principle’ approval to Saharanpur-based Shivalik Mercantile Cooperative Bank to convert into a Small Finance Bank (SFB) on January 6, making it the first such lender to have opted for the transition.
The ‘in-principle’ approval implies that the lender now has 18 months to comply with all conditions required to get the final SFB license from the RBI.
“On being satisfied that the applicant has complied with the requisite conditions laid down by it as part of “in-principle” approval, the RBI would consider granting it a licence for the commencement of banking business under Section 22 (1) of the Banking Regulation Act, 1949 as an SFB,” the regulator said.
As per the scheme, the minimum net worth of the proposed SFB was set at Rs 100 crore and minimum capital adequacy ratio of 15 percent from the date of commencement of business.
According to its annual report, Shivalik Mercantile Cooperative Bank’s net worth stood at Rs 77.21 crore and capital adequacy ratio was at 13.07 percent as on March 2019.
Shivalik Mercantile Cooperative Bank is registered under the Multi-state Cooperative Societies Act 2002 and operates through 31 branches across Uttar Pradesh, Madhya Pradesh and Uttarakhand. It acquired two Madhya Pradesh-based cooperative banks in 2010 and 2012.
The 23-year old bank had total deposits of Rs 1,051 crore, while its loan book stood at Rs 715 crore at the end of March 2019. The bank has 486 employees and focuses on priority sector lending. The bank’s net non-performing assets (NPA) ratio stood at 1.19 percent as on March 30, 2019.
The scheme on the voluntary transition of Urban Co-operative Bank (UCB) into an SFB was issued on September 27, 2018. It was part of the recommendations made by the High Powered Committee on UCBs led by then deputy governor R Gandhi.
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