Merger of urban cooperative banks now possible

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Aurangabad, March 31:

The Reserve Bank of India (RBI) has issued guidelines for the merger and merger of urban cooperative banks on the lines of government bank consolidation. This will facilitate the merger of two or more cooperative banks. In addition, RBI will also offer certain incentives to the urban cooperative bank, which will become an acquirer in the process.

The RBI said it may consider a merger request from two or three urban cooperative lenders under three specific circumstances, including, the net worth of the urban bank leading the merger proposal is expected to be positive. The money of depositors in the bank they wish to merge must be guaranteed to be protected. By setting out these rules, the RBI repealed the 2005 Co-operative Bank Consolidation Guidelines. As of the end of March 2020, there were 1,539 co-operative banks operating across the country, including 600 urban co-operative banks and 25 co-operative banks. multi-state in Maharashtra. Most banks have an increase in Nonperforming Loans (NPAs) and Nonperforming Loans (NPLs) which has put many urban cooperative banks in financial difficulty. The RBI said the merger is necessary to protect the interests of depositors.

Will increase people’s confidence

Protecting deposits will only increase public confidence. If loss-making banks merge their branches into a competent bank, depositors’ money will be saved. In addition, public confidence in cooperative banks will increase. This should be considered by the board of directors of financially weak banks. They themselves should propose a merger. Ultimately, protecting depositors’ money is important. Going forward, the RBI could also raise the merger issue while imposing restrictions on weak financial banks. Who can also be given a time-limited program, said banking expert Sujitkumar Bhavar.

Important terms

-The merger project requires the approval of the board of directors of the urban cooperative banks concerned by a two-thirds majority.

-The majority approved project will be submitted to the RBI for final regulatory approvals. There, the financial affairs of the two banks will be scrutinized.

-These banks can close loss-making branches of the acquired bank or merge them with their own branches.

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