The Reserve Bank High Powered Committee (HPC), under the Chairmanship of R. Gandhi, has submitted its recommendation on permissible business lines and appropriate size on conversion of Urban Co-operative Banks (UCBs) into commercial banks besides determining whether the time is opportune to issue new licenses to UCBs.
The HPC has recommended that a business size of Rs 20,000 crore or more may be the threshold limit beyond which a UCB may be expected to convert itself into a commercial bank. Besides, smaller UCBs with business size of less than Rs 20,000 crore willing to convert to small finance banks (SFBs) can apply to the Reserve Bank for conversion provided they fulfill all the eligibility criteria and selection processes prescribed by the Reserve Bank and further provided that the licensing window for SFBs is open.
The panel also suggested that licenses may be issued to financially sound and well-managed co-operative credit societies having a minimum track record of 5 years which satisfy the regulatory prescriptions set by the Reserve Bank as licensing conditions.
The new entry point norms (EPNs) to operate as a multi-state urban co-operative bank is Rs 100 crore, Rs 50 crore to operate beyond two districts and as a State level UCB. To convert into District level UCB (upto 2 districts) the minimum capital requirement is Rs 25 crore.
RBI on January 30, 2015, the Reserve Bank had set up panel to examine and recommend permissible business lines and appropriate size, and examine the issues with regard to conversion of UCBs into commercial banks besides determining whether the time is opportune to issue new licenses to UCBs as recommended by the Expert Committee on Licensing of New UCBs (Malegam Committee).
This was pursuant to the recommendation made by the Standing Advisory Committee (SAC) on UCBs in its meeting held on October 20, 2014.