RBI said, “Shivalik Small Finance Bank Limited has commenced operations as a small finance bank with effect from April 26, 2021.The Reserve Bank has issued a licence to the bank under Section 22 (1) of the Banking Regulation Act, 1949 to carry on the business of small finance bank in India.”
The former co-operative bank was granted an in-principle approval for a transition into a small finance bank under the scheme on voluntary transition of Urban co-operative bank into a small finance bank issued on September 27, 2018.
Suveer Kumar Gupta, Managing Director & CEO, Shivalik Small Finance Bank said, “This is a momentous achievement for Shivalik, and I’m proud of all our teams that have worked relentlessly over the years to give us this edge, which has made it possible for us to embark on this exciting journey today. Credit also goes to all our esteemed customers and partners that have humbled us with their unwavering support through the years. Finally, and most importantly, a big thank you to Reserve Bank of India, Central Registar of Co-operative Socities and other regulatory bodies for their support and guidance in ensuring a smooth and seamless transition of business.”
He added, “There is a signifcant and urgent need for seamless access to professional banking services across all corners of the counrty, especailly when it comes to small businesses, which are the backbone of our growing economy. At Shivalik Small Finance Bank, we are well positioned to be able to cater to this growing demand through our multi-dimensional approach that has helped us scale up our physical presence, our digital presence through valuable fintech partnerships and a wide range of customized solutions that address a diverse set of needs. Additionally, with our migration now from a co-operative ownership structure to a corporate structure, we will only become more flexible and nimble in decision making which will further augment our ability to offer meaningful experiences to our customers.”
Shivalik Bank’s MD & CEO, Suveer Kumar Gupta in a interaction with ETBFSI had shared the transition journey from co-operative bank to small finance bank and its growth plans ahead.
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.
Suveer Kumar Gupta, Managing Director & Chief Executive Officer, Shivalik Bank
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.
The Reserve Bank of India (RBI) conferred Shivalik Mercantile Co-operative Bank (SCMB) license to carry on business as a Small Finance Bank (SFB)’s under its voluntary transition scheme. The lender said the entity, renamed as Shivalik Small Finance Bank, which would commence business as an SFB by April 2021, was the first Urban Cooperative Bank (UCB) to transit under the scheme.
Shivalik Small Finance Bank said it was the first, and the largest multi-state Urban Co-operative bank in Uttar Pradesh, and had 4 lakh customers as its base. The newly minted small finance bank said it handled a business size of Rs 1800 crore, and had focused on providing a digital experience to its customers.
The SFB said it had been given an 18 month timeline to commence and transition as an entity by the RBI, whilst adding that the lender was expecting the transition to complete by April 2021.
Suveer Kumar Gupta, MD & CEO, Shivalik Mercantile Cooperative Bank, said “It is an honor for Shivalik to be the first UCB in India to transition to a Small Finance Bank. A scheduled commercial banking license will alter our identity significantly allowing us to offer banking services across the country, offer a complete range of retail banking solutions to our customers and further our goal of financial inclusion.”
“Shivalik can rapidly innovate and rollout highly personalized products and services for its customers through its advanced technology platform including the ability to implement Open Banking, and easily collaborate with the external ecosystem, including fintech’s, digital businesses and non-banking financial service providers,” he further added, whilst noting “We believe that technology adoption will allow us to explore previously under explored customer segments and expand across the country without reliance on a physical branch network.”