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Canara Bank, the Bangalore-based public sector lender, is in the final lap of taking over Amanath Co-operative Bank, with the Karnataka government all set to issue a gazette notification soon. With this process a formality now, the NPA-loaded history of Amanath Bank will come to end in the true banking sense and will be an entity focused only on recovering the Rs 165 crore of outstanding loans.
Amanath Cooperative Bank was started in January 1977, with 3,000 members. The RBI conferred the scheduled status on Amanath Bank effective January 2000 and included it in the second schedule to the Reserve Bank of India Act, 1934. The bank over the past few years had been grappling with unwieldy NPAs and during mid 2013, the RBI had to step in to freeze its operations, leading to a cascading effect on its small-time depositors.
Canara Bank will be taking a minor hit on this merger given the context that capital has completely eroded and the public-sector lender will have to service the Rs 396 crore worth of deposits from around 200,000 depositors. Senior officials of Canara Bank indicated to Business Standard that there is an ongoing judicial process at the Karnataka High Court, the next hearing of which is expected during early March, 2014. "Pending that, we will not be able to spell out the process on how the integration will happen," the officials said.
It is understood that Canara Bank is looking at how to leverage the depositors' base to take its financial inclusion model further given the context that Amanath has 15 branches in various districts of Karnataka. "These will be rebranded as Canara Bank branches and will give us a decent foothold to expand our presence," a senior official of Canara Bank said.
According to information available, Canara Bank will start the KYC process on the depositors of Amanath Bank, post the Gazette notification and will also take on its books, fixed assets worth Rs 38 crore from Amanath Bank. The public-sector lender will also examine how it will able to absorb the 300-odd employees of Amanath Bank across its banking network.
