Stage set for first-time ever merger of two co-op banks

Vadodara-based Baroda District Industrial Co-operative Bank (BDICB) would be merged with Prime Co-operative Bank of Surat in the next three months.

The proposed merger would be the first case of uniting two urban co-operative bank after the Reserve Bank of India (RBI) unveiled the guidelines in February this year.

The decision was taken with the permission of the BDICB shareholders at a general meeting held in Vadodara. Both the banks have initiated the process of merger.

BDICB has deposits worth Rs 22 crore and a network of seven branches in Vadodara district.

The bank was ailing for the last few years in the aftermath of Madhavpura Mercantile Co-operative Bank (MMCB) bust that had rocked the co-operative banking sector. The Prime Bank has 13 computerised branches with deposits over Rs 135 crore with nearly zero NPA level.

The chairman of BDICB, Bhupendra Shah said," The decision has been taken in the best interest of the bank depositors and its shareholders. The co-operative banks have faced a major setback in Gujarat and it is better to economise the scale of operations to survive in adverse situations. The mistrust in the wake of the co-operative bank scandal has reduced the deposits in such banks. Considering the erosion of deposit base, it is recommeded that banks become stronger."

BDICB has deposits of about Rs 1 crore with MMCB. However, some of the shareholders of BDICB, that has around 12,000 shareholders, accused board members of taking the decision of merger undemocratically.

Commenting on this accusation, Shah said, "Around 85 shareholders who have majority stake in the bank were present at the meeting. The fact that the board members have shown willingness to lose their respective positions after the merger proves that tis step is being taken in the best interest of the society at large."

The board has also decided to retain all its present employees, added Shah.