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In a conversation with ETBFSI on its transition from an urban co-operative bank to a small finance bank. Shivali Mercantile Co-operative Bank’s Chief Executive Officer and Managing Director, Suveer Kumar Gupta talks about the reason behind the transition, how it’s relying and investing in digital capabilities and partnerships with FinTechs and MSMEs being a key focus customer base.

Journey from UCB to SFB

Shivalik Mercantile Co-operative Bank started in Saharanpur District in Uttar Pradesh is the first urban co-operative bank to transition into a small finance Bank. It acquired Bhoj Nagarik Sahakari Bank Maryadit in Dhar and became a multi-state co-operative bank and further expanded in Indore after acquiring Malwa Commercial Cooperative Bank Limited.

The bank has 31 branches and business size around Rs 2050 crore with a deposit base of Rs 1225 crore and advance of Rs 825 crore as of March 31, 2021.

Suveer Kumar Gupta, MD & CEO, Shivalik Mercantile Co-operative Bank Ltd on the transition towards the small finance bank said, “Right from the very start we wanted to be a strong and well managed one of the larger co-operative banks in the country and had aspirations to grow and be professional. For the past few years we’ve been improving our systems, controlling measures, risk management practices and most of all working towards building a strong technology infrastructure. At the same time our focus was on financial inclusion and MSMEs.”

When the Reserve Bank of India in 2015 put forward the small finance bank vision the bank realised they’re in sync with the vision they had set for Shivalik Bank. Gupta said, “The synergies were significant towards a transition to SFB and then RBI came up with voluntary transition guidelines and we jumped to the opportunity and applied for the transition and got an in-principle approval in January 2020 and the final license was in January 2021 and are in the last leg of the journey and hope to go live very soon.”

While the SFB transition will bring in more regulatory oversight and compliance norms, the bank sees numerous benefits with the transition to SFB as existing SFB proven the business model of lending to priority sector with small ticket sizes is successful and as a co-operative bank they have been following for some time.

Gupta said, “We are clear and no two thoughts on how the business will progress. Becoming an SFB will allow us to raise capital for growth and becoming a commercial bank will make it easier to approach investors and infuse a greater trust among the customer base. Further as co-operative banks miss out on government and institutional business, becoming a scheduled commercial bank will help them to reach out for institutional business.”

The bank is eyeing MSMEs as the key are of the focus and 90% of its book is fully secured and about 10% of their portfolio is microfinance. Going forward they tend to retain the philosophy of secured lending and are not shy of unsecured lending as well and will be looking forward to introducing some products in the unsecured side but major focus will be on the secured part.

We are clear and no two thoughts on how the business will progress. Becoming an SFB will allow us to raise capital for growth and becoming a commercial bank will make it easier to approach investors and infuse a greater trust among the customer base. Further as co-operative banks miss out on government and institutional business, becoming a scheduled commercial bank will help them to reach out for institutional business.Suveer Kumar Gupta, MD & CEO, Shivalik Mercantile Co-operative Bank

Ecosystem Partnerships

Gupta says as a bank they realised that the thought process of ownership mindset will not work for them because they are not experts in everything. He said, “ and have partnered with India Gold providing gold loan to customers at doorstep, Airtel Payments Bank for digital sourcing of loans, we’ve tied up Atyati, a microfinance banking correspondent partner and we are in discussion with other few fintechs as well some on customer onboarding side and some on digital sourcing side and invoice financing side where they’re using blockchain.”

They are very much open to digital partnerships and believe having a pan India license the best way to is by not being asset heavy with physical branches but can be done digitally too. “Any customer sitting anywhere can open and operate a Shivalik bank account just using a mobile phone and that is the way we want to go forward.”

We are bankers and will stick to banking. As for technology and other services, let’s seek experts and partner with them. We’ve been looking forward to partner with FinTechsSuveer Kumar Gupta, MD & CEO, Shivalik Mercantile Co-operative Bank

Physical Expansion

On Physical expansion, they want to be a global local bank. He adds, we would do it in the northern region and by physical I would not only consider bank branches but also digital assisted channels like banking correspondents moving around with micro-ATMs. We also have micro-ATMs which are being used by banking correspondents and are connected to the core-banking system in real time.

He explained, customers can withdraw by swiping card or Aadhar and deposit money too among other banking services like bank-in-a-box kind of thing. This would eventually help us in expansion.

Digital Savvy

As the bank is heavily relying on digital partnership and capabilities they’re adequately focusing on cyber-security. He said, “We are focused on the safety aspects of digital exposure. From a customer point of view, we’ve put in all safeguards like two factor authentication, info-sec testing before release, customer education programmes, vulnerability testing, applications have biometric logins. From an organisation perspective, there’s an information-security (info-sec) team in place and internal policy on info-sec has been designed by one of the Big 4 and are one of the first co-operative banks to get cyber-insurance much ahead of the RBI mandate. “

Gupta also said, The bank has hosted its data in a tier-4 data center which is considered to be the best in Asia and its core banking system provided by Infosys is on a hosted model making Shivalik Bank as the first bank to do it.

The bank is ready for the transition and is waiting for the final go-ahead from the regulator, concluded Gupta.