Aurangabad, March 31:
The Reserve Bank of India (RBI) has issued guidelines for the amalgamation and merger of urban co-operative banks on the lines of government bank consolidation. This will facilitate the amalgamation of two or more co-operative banks. In addition, RBI will also offer certain incentives to the urban cooperative bank that will become an acquirer in the process.
The RBI said it may consider an application for amalgamation of two or three urban cooperative lenders under three specific circumstances that include, the net worth of the urban bank leading the amalgamation proposal should be positive. The money of the depositors in the bank they want to merge should be guaranteed to be protected. In stating these rules, the RBI has revoked the 2005 co-operative bank consolidation guidelines. By the end of March 2020, there are 1,539 co-operative banks operating across the country of which 600 urban cooperative banks and 25 multi-state cooperative banks are in Maharashtra. Most of the banks have rising non-performing loans (NPAs) and non-performing loans (NPLs) that have put many urban co-operative banks in financial trouble. The RBI has said that the merger is necessary to protect the interests of depositors.
Will increase confidence of people
The protection of deposits will only increase the confidence of the people. If the loss-making banks amalgamate their branches into a competent bank, the money of the depositors will be saved. Moreover, public trust in co-operative banks will increase. This should be considered by the board of directors of financially weak banks. They themselves should propose an amalgamation. Ultimately the protection of depositors money is important. In the future, the RBI may also raise the issue of the merger while imposing restrictions on weak financial banks. Which can also be given a time-bound program, said Sujitkumar Bhavar, banking expert.
Important terms
-The proposed merger requires the approval of the board of directors of the concerned urban co-operative banks by a two-thirds majority.
-The draft approved by the majority will be submitted to the RBI for final regulatory approvals. There, the financial affairs of both the banks will be scrutinized.
-These banks may shut loss-making branches of the acquired bank or merge them with their own branches.