Shree Suvarna, Cosmos Co-op Bk in merger talks

In what appears to be a move to pre-empt moratorium and other restrictions from the Reserve Bank of India, city-based Shree Suvarna Sahakari Bank (Shree Suvarna) has proposed a merger with Cosmos Co-operative Bank, which is another Pune-based bank on an aggressive takeover spree over the last couple of years in an attempt to add to its branch network.

The bank has been suffering from heavy non-performing assets (NPAs) and losses and the decision to merge it with Cosmos was made keeping in mind the interests of depositors and shareholders, Dnyaneshwar Agashe, chairman of Shree Suvarna, said here today.

Shree Suvarna currently has 12 branches with a deposit base of Rs 810 crore and advances of Rs 650 crore. It has NPAs of Rs 125 crore, i.e. 13% as against 7% maximum allowable under the Reserve Bank norms. "The bank is facing a significant difficulty in recovering loans extended to the real estate sector," Agashe said.

The proposal to merge with Cosmos will be placed before shareholders in the forthcoming AGM to seek approval. Cosmos' board has already approved a resolution to amalgamate Shree Suvarna with itself. Once Shree Suvarna shareholders pass the resolution, it will be forwarded to RBI for final approval.

The bank has enough reserves to absorb the losses of Shree Suvarna. Cosmos will also retain all the branches of Shree Suvarna excepting those that are in the same location. The bank will also absorb most of the staff of Shree Suvarna, Mukund Abhyankar, chairman of Cosmos Bank, said.