Saraswat, Cosmos to seek RBI approval for universal banking licences

Saraswat Co-operative Bank
Saraswat Co-operative Bank and Cosmos Co-operative Bank are set to seek the Reserve Bank of India’s (RBI’s) approval to convert into full-fledged commercial banks. 

The two leading urban co-operative banks (UCBs) — with over 100 years of history each — will be the first to seek the central bank’s nod after the revisit of regulations pertaining to the sector.

Saraswat Bank is expected to put forward its application to the central bank by the second half of 2020-21, while Cosmos Bank is 
currently in the process of tightening its information technology systems, particularly on the payments and remittances front. 

Both banks declined comment on their universal banking ambitions. While Saraswat Bank and Cosmos Bank had approached the central bank with universal banking plans a few years ago, the trigger for them to look anew at the same are the huge changes on the regulatory side. 


The RBI has said that UCBs with deposits of Rs 100 crore are to set up a board for management with the board of directors 
carrying out due diligence for their appointment. These internal structures will add another layer of bureaucracy, even as it slows down decision-making. 

The small finance bank route is also not an option, given the inherent curbs placed on this model — it would perforce mean they will have to wind down business on both the asset and liabilities side. Given this, it makes sense to directly apply for a universal banking licence.

The business size of Saraswat Bank in 2018-19 stood at Rs 61,811 crore (advances of Rs 25,797 crore and deposits of Rs 36,014 crore), while that of Cosmos Bank was Rs 26,952 crore (advances of Rs 11,599 crore and deposits of Rs 15,353 crore).

It may be recalled that the R Gandhi Committee on UCBs was of the view that a threshold business size of Rs 20,000 crore can be considered for voluntary conversion of multi-state UCBs into scheduled commercial banks to ensure uniform regulation. “This business size is appropriate as the biggest UCB should not end up being the smallest commercial bank. Further, a proper transition period should be provided to UCBs for conversion into commercial banks,” it had observed.

Of late, the central bank has tightened the regulatory framework for UCB — be it their exposure limits and priority sector lending — and brought in those with assets of Rs 500 crore and above under the Central Repository of Information on Large Credits.

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