Money & Banking

Now, New India Co-op Bank to convert into SFB

K Ram Kumar Mumbai | Updated on February 11, 2020

Close on the heels of the Uttar Pradesh-based Shivalik Mercantile Co-operative Bank taking the lead among urban co-operative banks to convert into a Small Finance Bank, Mumbai-based New India Co-operative Bank, too, is planning to go down that road.

New India Co-operative Bank (NICB) has sent a notice to its members informing them that a special general body meeting would be held on January 18 to approve amendment to the by-laws; to transit NICB into a Small Fnance Bank (SFB) as per the RBI’s scheme (for voluntary transition of a urban co-operative bank into an SFB); and to authorise the board of directors to take steps for facilitating the smooth transition process.

Further, the meeting will also identify and approve the promoters as envisaged by the RBI. NICB began operations in 1968 as the Bombay Labour Co-operative Bank (founded by the late George Fernandes, socialist stalwart, trade unionist and union minister, and noted criminal lawyer and trade unionist Ranjit Bhanu).

The bank has 31 branches spread across Maharashtra and Gujarat. As of March-end 2019, the bank had deposits and advances aggregating ₹26,44.41 crore (₹2,547.09 crore as of March-end 2018) and ₹1,339.02 crore (₹1,167.73 crore), respectively. It reported a net profit of ₹8.01 crore in FY2019 against ₹7.60 crore in FY2018.

With two multi-state Urban Co-operative Banks (UCBs) initiating steps to convert into a SFB, larger UCBs such as Saraswat Co-operative Bank, SVC Co-operative Bank, Bharat Co-operative Bank, Abhyudaya Co-operative Bank and Thane Janata Sahakari Bank, are also expected to weigh the possibility of converting into an SFB.

Universal bank character

With the RBI aligning the priority sector lending norms for UCBs with that for SFBs and paring their limits on exposure to single and group borrowers/ parties and large exposures, the UCBs will lose their universal bank character and become narrow banks, say co-operative banking experts.

As per the RBI’s scheme on voluntary transition of UCB into an SFB, UCBs with a minimum net worth of ₹50 crore and maintaining capital to risk (weighted) assets ratio of 9 per cent and above, are eligible to apply for voluntary transition to SFB under this scheme.

The minimum net worth of the proposed SFB should be ₹100 crore from the date of commencement of business.

Published on January 07, 2020

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