Mumbai: Saraswat Cooperative Bank—the largest lender in the segment—plans to convert itself into a private bank and has sounded off the Reserve Bank of India (RBI) of its intentions. The move is driven by a need to grow its business as there are restrictions on cooperative entities growing their balance sheet. The 93-year-old Saraswat is the largest and among the better-managed lenders of the 1,750 urban cooperative banks that are doing business in India. The bank has been paying dividends to its shareholders continuously since its inception. According to sources, the bank has been told by RBI that it cannot continue to grow its balance sheet unfettered as a cooperative. Also, the cooperative structure places restrictions on the size of the loans that the bank can extend to each client even if it has the resources to provide very large loans. Commercial banks, however, face no such restriction and their growth is only restricted by the amount of capital they can raise. Cooperative banks can raise capital only by selling shares to customers. Also because of the cap on dividend their shares are not very attractive to investors as they do not provide the same upside as that of companies that are registered under the Companies Act. The bank’s MD SK Banerji and chairman Eknath Thakur could not be reached for comments. In many ways the bank already provides all the services of a big bank. For instance, the bank’s operations are out of a core banking platform and it is therefore in a position to offer anywhere anytime banking offered by private banks. It also offers Visa cards and internet banking services and has for a long time been offering forex services to its customers. Central banking sources however said that the bank may have to wait until the guidelines for new private banks are finalized before it can expect an approval.
TOI
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