Co-op body welcomes merger guidelines

The Gujarat Urban Co-operative Banks Federation (GUCBF), an umbrella organisation of urban co-operative banks of the state, has welcomed the Reserve Bank of India (RBI) guidelines to facilitate mergers and amalgamation of stronger banks with weaker ones.

R S Patel, chairman, GUCBF said in a statement that at a time when the co-operative banking sector is competing with the multinational banks, the decision of the RBI to merge banks in the co-operative sector is praiseworthy. "The RBI has clearly spelt out the guidelines and has even made the process of mergers simple," he said.

The RBI has, in the recent past, received recommendations from the urban co-operative banks for merger of banks. With a view to encourage and facilitate consolidation in the co-operative banking sector, the RBI has decided to issue guidelines to facilitate merger or amalgamation in the sector.

These guidelines have been sent to the chief executives of the urban co-operative banks with a request to place them before their board. The guidelines have also been forwarded to the registrars of co-operative societies. Under the guidelines, a co-operative bank can merge only with another co-operative bank situated in the same state or with a co-operative bank registered under the Multi-state Co-operative Societies Act.

According to the guidelines, the RBI will consider proposals for the merger and amalgamation in the urban banks sector when the networth of the acquired bank is positive and the acquirer bank assures to protect entire deposits of all the depositors of the acquired bank.

Mergers will also be possible when the networth of acquired bank is negative but the acquirer bank on its own assures to protect deposits of all the depositors of the acquired bank. The RBI has also asked for the support of the state government in protecting the deposits of the banks.

However, co-operative bankers view the role of the office of the Registrar of Co-operatives in Gujarat with some suspicion. All co-operative banks in the state have received the five page letter containing guidelines on mergers.

"The office of the RoC has not been able to do enough to help depositors get back their money in cases where banks have gone bust. It remains to be seen how it handles this assignment," said a co-operative sector banker.

Time for solace

• The Gujarat Urban Co-operative Banks Federation, an umbrella organisation of co-operative banks in the state has welcomed the RBI guidelines for mergers of stronger banks with weaker ones
• All co-operative banks in the state have received the five page letter containing guidelines on mergers
• However bankers question the role of Registrar of Co-operatives in the process