Urban cooperative Banks (UCBs) interested in converting themselves into small finance banks (SFBs) will have to first promote a public limited company and then transfer its assets and liabilities into that new entity. This is the stipulation of the Reserve Bank of India in its final guidelines for voluntary conversion of UCBs into SFBs. The guidelines also state that UCBs shall identify promoters for making an application to RBI for transition. After due diligence, RBI will issue an in-principle approval for transitioning of the UCB into SFB for which the regulator will allow a maximum period of 18 months to start a business as an SFB. RBI said the promoters will have to incorporate a public limited company under the Companies Act, 2013 having the word ‘bank’ in its name after receiving the in-principle approval from RBI and its board should meet RBI’s ‘fit and proper’ criteria. The incorporated company should then enter into an agreement with the UCB for transfer of assets and liabilities, to be executed at a future date
