RBI has issued a notification dated 27th September asking those UCBs which are eligible and wishing transition into Small Finance Banks to forward their applications to its Bandra Kurla Complex office.
Under the scheme UCBs with a good track record shall be eligible to voluntarily transit into a SFB. RBI will issue an in-principle approval for transitioning and will allow a maximum period of 18 months for commencement of business as SFB.
The new company shall enter into an agreement with UCB for transfer of assets and liabilities, to be executed at a future date (after issuance of SFB licence).
The promoters shall then approach RBI for issuance of SFB licence, with evidence of funds available for infusion as equity in any acceptable form, so as to ensure that the SFB commences operations with a minimum net worth of Rs.1 billion and minimum promoters’ contribution of 26% of the paid-up equity capital.
The UCB will surrender its banking licence to RBI. The resultant Co-operative Society will be wound up in due course.
UCBs with a minimum net worth of Rs.500 million and maintaining Capital to Risk (Weighted) Assets Ratio of 9% and above are eligible to apply for voluntary transition to SFB under this scheme.
The minimum net worth of the proposed SFB shall be Rs.1 billion from the date of commencement of business. As small finance banks are required to maintain a minimum capital adequacy ratio of 15 per cent of its risk weighted assets (RWA) on a continuous basis, availability of adequate capital shall be ensured. Promoters shall maintain at least 26% of the paid-up equity capital.
Earlier, in June this year RBI had said that after taking the R Gandhi Committee recommendations into consideration, it has been decided to allow voluntary transition of UCBs meeting the prescribed criteria into Small Finance Banks. It had also promised to come with the detailed scheme, which has been done now.
Cooperators cutting across party lines have argued that cooperative and especially the Urban Coop Banks should be allowed to grow to their full potential and restrictions not be imposed on their aspirations.
The limiting factor for UCBs has been that they cannot participate in the 12 core business activities owing to the tag ‘cooperative’ such as road constructions, offering bank guarantees and other things.
Instead of addressing the genuine concern of the sector, RBI seems hell bent on destroying cooperatives, a large number of cooperators told Indian Cooperative.
