RBI To Allow Urban Cooperative Banks To Become Small Finance Banks

The Reserve Bank of India today said it will allow urban cooperative banks to voluntarily convert themselves into small finance banks.

The committee on urban cooperative banks, chaired by then RBI Deputy Governor R Gandhi, had recommended “the voluntary conversion of large multi-state UCBs into joint stock companies and other UCBs which meet certain criteria into small finance banks,” the regulator said in its statement on developmental and regulatory policies.

The RBI will release detailed guidelines in this regard separately.

The committee, which submitted its report in July 2015, had stated that a business size of Rs 20,000 crore could be considered the threshold limit, beyond which UCBs may convert themselves into commercial banks.

“Though UCBs were set up as small banks offering banking services to people of small means belonging to the lower and middle classes, a well laid out transition path is required for at least the larger UCBs to convert themselves into universal/ niche commercial banks due to the changing financial landscape in the country and providing further growth opportunity to well managed UCBs,” the committee report had said.

The report had also proposed a transition period for these UCBs to convert into commercial banks.