RBI examines proposed merger of two or more urban cooperative banks

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The Reserve Bank of India (RBI) announced on Tuesday that it would consider merger and merger proposals of two or more urban cooperative banks (UCBs).

It comes even as the central bank is evaluating proposals from three investors to acquire the scammed Punjab & Maharashtra Co-operative (PMC).

According to the “Merger of Urban Co-operative Banks, Directions, 2020” released by the RBI on Tuesday, it may consider merger and merger proposals between UCBs in three circumstances, including when the net worth of the merged bank is positive. , and the Merging bank ensures that all deposits of all depositors of the merged bank are protected.

The second circumstance for consideration of proposals is when the equity of the merged bank is negative and the merging bank itself ensures that the deposits of depositors of the merged bank are protected.

The third circumstance is when the equity of the merged bank is negative and the merging bank ensures that the deposits of all depositors of the merged bank are protected, with the financial support of the state government granted from the outset in part of the merger process.

The guidelines come in the context of the placement of 52 UCBs under All Inclusive Directions (from April 1, 2015 until December 11, 2020) by the Reserve Bank, according to the latest “Banking Sector Trends and Progress Report in India ”from the RBI. At the end of March 2020, there were 1,539 UCBs in the country.

The RBI said the merger decision must be approved by a two-thirds majority of the total number of board members of the merging and amalgamated UCBs, and not just those present and voting.

The draft merger plan will be approved by the shareholders of each UCB by a resolution adopted by a majority representing two-thirds of the shareholders, both in number and in value, present in person at a meeting called for this purpose.

The RBI has stated that it has discretionary powers to approve the voluntary merger of UCB under the provisions of Section 44A read with Section 56 of the Banking Regulation Act 1949, as amended by law. on banking regulations (amendment) of 2020 (39 of 2020).

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