New India Co-operative Bank (NICB) on Monday said the Special General Body meeting of its shareholders held on January 18, 2020, passed a resolution to convert into a Small Finance Bank (SFB).

The Mumbai-headquartered multi-State urban co-operative bank (UCB), in a statement, said it would be approaching the Central Registrar of Societies and the Reserve Bank of India (RBI) for taking this step further.

According to sources, about 12-14 individuals, including many of the bank’s current Directors — together holding about 38 per cent of the paid-up share capital of the Bank — will become the promoters of the proposed SFB.

NICB Chairman Hiren Bhanu emphasised that his bank already meets the stringent guideline laid down by the RBI for an SFB to have a minimum net-worth of ₹200 crore on the date of commencement of its operations. NICB’s current net-worth is more than ₹230 crore.

As per the draft guidelines for ‘on tap’ licensing of SFBs in the private sector, once a UCB converts into SFB, the converted entity should have a minimum net-worth of ₹100 crore from the date of commencement of business. However, the UCB will have to increase their minimum net-worth to ₹200 crore within five years from the date of commencement of business.

According to RBI’s September 2018 circular on “Voluntary Transition of Primary (Urban) Co-operative Banks (UCBs) into Small Finance Banks (SFBs)”, 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.

Bhanu said these guidelines allow select well-run UCBs to convert into SFB, thereby unlocking the benefits provided by the RBI such as raising external capital, open branch policy, etc.

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