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Merger/Amalgamation in the cooperative banking sector. - RBI Guidelines

With a view to encouraging and facilitating consolidation and emergence of strong entities and providing an avenue for non-disruptive exit of weak/unviable entities in the co-operative banking sector, the Reserve Bank has issued suitable guidelines to facilitate merger/amalgamation in the sector.

Reserve Bank of India will consider proposals for merger and amalgamation in the urban banks sector in the following circumstances:

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;

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; and

When the networth of the acquired bank is negative and the acquirer bank assures to protect the deposits of all the depositors with financial support from the State Government extended upfront as part of the process of merger.

The Reserve Bank has further stated that in all cases of merger/ amalgamation, the financial parameters of the acquirer bank post merger will have to conform to the prescribed minimum prudential and regulatory requirement for urban co-operative banks. The realisable value of assets will have to be assessed through a process of due diligence.

While considering such proposals, the Reserve Bank will confine itself to the financial aspects of the merger and to the interests of depositors as well as the stability of the financial system.

Who can merge?

A cooperative bank can merge only with another cooperative bank situated in the same state or with a cooperative bank registered under Multi State Cooperative Societies Act.

Procedure for Merger... Read More

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