In a development which highlights the weakness of working within a cooperative framework, Uttar Pradesh based Shivalik Mercantile Cooperative Bank has been allowed to make a transition into a Small Finance Bank (SFB) by the RBI.
Reacting to the RBI approval Suveer Kumar Gupta, MD & CEO, Shivalik Mercantile Cooperative Bank said, “We are excited with the development as we faced a number of issues in running the bank as a cooperative entity”.
We are facing several challenges in running the bank including the limited sources for raising capital. We are not able to offer services that will benefit customers, he underlined.
He further said ”We are not allowed to give credit card services to the customers and there are so many problems which we are facing. Developing the bank with the limited resources is the main challenge. So, now we will complete all the formalities and submit the papers to RBI sooner than later,” Gupta asserted.
“We hope that after getting the license of Small Finance Bank we will avail all the facilities to attract more and more customers. Besides, we have failed to get government business”, he said to this correspondent on the phone.
In the wake of the Punjab and Maharashtra Co-operative (PMC) Bank scam, the apex bank tightened the screw and proposed that UCBs should severely restrict their business model and bring in single and group exposure norms. Half of their portfolios should comprise of loans of not over Rs 25 lakh.
With regard to Shivalik bank, RBI has granted “in-principle” approval to Shivalik Mercantile Co-operative Bank Limited (the applicant) for transition into a Small Finance Bank (SFB) under the “Scheme of voluntary transition of Urban Co-operative Bank into a Small Finance Bank” (the Scheme) issued on September 27, 2018.
The multi state-Shivalik Mercantile Cooperative Bank is said to be the fast growing bank in North India. The bank has a deposit base of around Rs 1200 crore and loans and advances of about Rs 750 crore. The bank is spread across UP and MP having 31 branches. In the last financial year 2018-19 the bank earned a net profit of Rs 3.85 crore.
“The “in-principle” approval granted will be valid for 18 months to enable the applicant to comply with the requirements under the Scheme, the Guidelines for ‘on tap’ Licensing of Small Finance Banks in the Private Sector dated December 5, 2019 and fulfil other conditions as stipulated by 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 commencement of banking business under Section 22 (1) of the Banking Regulation Act, 1949 as an SFB”, reads an RBI release.