RBI nod for merger of DCBs

Merger will ultimately lead to the formation of Kerala Bank

The Reserve Bank of India (RBI) has given the go-ahead to the State government to amalgamate 13 district cooperative banks (DCBs) with the Kerala State Cooperative Bank for forming the proposed Kerala Bank.

All district banks, except the Malappuram District Cooperative Bank, had approved the scheme of amalgamation proposed by the State government at their respective general body meetings. The government may give one more opportunity to the Malappuram bank’s general body to approve the scheme.

The merger approval would be contingent upon the order of the High Court on a case challenging the amendment to Section 14(A) of the Kerala State Cooperative Societies Act. The government would have to complete the stipulations laid for merger and submit a compliance report to the apex bank before March 31, 2020.

Among other conditions laid for the amalgamation, the RBI had insisted that the State government should closely abide by the provisions of the KSCS Act and rules at every stage, strengthen the capital of the KSCB to ensure sustained networth and adherence to capital to risk weighted assets ratio (CRAR) norms, a standard metric to assess balance sheet strength of banks, post merger. It had also said that the State government would have to consistently infuse additional capital and also put in place a well-defined governance structure by amending the KSCS Act.

The government submitted a compliance report to the RBI in March and the final approval for amalgamation of 13 district banks was accorded. Minister for Cooperation Kadakampally Surendran exuded the confidence of completing the procedures within the stipulated time frame.

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