Shamrao Vithal Co-operative Bank readying itself to convert into a full-fledged commercial bank

MUMBAI: After Saraswat, another multi-state urban co-operative bank, Shamrao Vithal Co-operative Bank is planning to convert itself into a commercial bank at a time the Reserve Bank of India is mulling offering differentiated licences.
Unveiling the bank’s new logo in Mumbai on Monday, the bank’s chairman Suresh Hemmady said, We are trying to make sure, we are in the right direction. This (unveiling of the new logo) would be the first step towards it (converting into a commercial bank).

The banking is awaiting RBI guidelines to start dialogue with the regulator and is also working on a road map internally. “Unless there are clear norms from RBI, we cannot take things forward” said Shrinivas Joshi, managing director of the bank.

The bank has already sought its board’s approval for the proposal and may go to the shareholders and other stake holders once there is more clarity from the RBI, Mr Hemmady said. The Reserve Bank has indicated its intention to allow co-operative banks to convert to full-fledged commercial banks subject to certain conditions.

Among others, Saraswat Co-operative Bank has also indicated its interest in converting into a commercial bank way back in 2011 and has already gone for a rebranding. In the past, Development Credit Bank converted into a commercial bank in 1995.

One of the major constraints faced by co-operative banks is raising capital, according to Mr Joshi. Unlike, commercial banks, co-operative banks cannot raise capital at premium and have to issue shares at face value.

The bank has a business worth Rs 17500 crore as of end March’14, and it plans to raise this to Rs 45000 crore over the next five years and expects to grow at an average annual rate of 15% per annum. The bank has a network of 157 branches across 9 states- Maharashtra, Karnataka, Goa, Tamil Nadu, Andhra Pradesh, Madhya Pradesh, Gujarat, Rajasthan and Delhi. The bank is now seeking to expand t one more state- Haryana this year. The Reserve Bank allows Urban Co-operative banks to expand in one state every year.

For the financial year ending March’14, the bank earned a net profit of Rs 103 crore and a capital adequacy ratio of 13.5%.