AllBank alters plan, to merge rural banks into two entities

Diverging from its earlier plans, Allahabad Bank (AllBank) has decided to merge its six regional rural banks (RRB) into two separate entities instead of one at the behest of the Uttar Pradesh government.

It has made a fresh proposal to this effect and has forwarded it to the UP government. The state government's approval is awaited.

Sources close to the development said that the UP government was against the idea of merging all its six RRBs into a single entity and had instead asked AllBank to convert them into two entities to which it has agreed.

The six RRBs at All-Bank are Baghirath Gramin Bank at Sitapur, Sariyu Gramin Bank at Lakhimpur, Sravasthi Gramin Bank at Bahraich, Chhatrasal Gramin Bank at Urai, Tulsi Gramin Bank at Banda Vrindhyavasini at Mirzapur all in Uttar Pradesh.

AllBank also has a seventh RRB in Madhya Pradesh - the Sarda Gramin Bank, which will keep functioning as a single entity.

"We have divided these six RRBs into two groups which would be merged to form two separate entities. Cumulative business volumes of these entities stand at around Rs 3,000 crore while the total number of branches are around 430. Total profits of these six banks was close to Rs 300 crore and its gross non-performing asset (NPA) stood at 12 per cent," said O N Singh, chairman and managing director, AllBank.

Singh was talking to reporters at the sideline on a its third annual general meeting in the city today.

"It is not a regular practice among Gramin Bank's to make provisions and write off non-performing assets hence it has remained on the higher side. Provisioning followed by commercial banks if practiced by RRBs would being them down to moderate levels," explained officials from the bank.

In a parallel development All-Bank has shorlisted IIM, Kolkata, IIM, Ahmedabad and XLRI for formulating its human resource restructuring plan that would also involve productivity linked incentive schemes for employees.

Meanwhile, it has decided to invest close to Rs 600 crore, at Rs 100 every year for renovating all its 1935 branches over the next five to six years.

The bank has also appointed Ernst & Young as a consultant for formulating the business plan for its ailing subsidiary AllBank Finance Ltd.

"We have applied for merchant banking licence from Sebi and have would also firmed up plans of entering insurance business," Singh said.