The Bank of Baroda (BoB) had received approvals from the government and the Reserve Bank of India (RBI) for taking over the assets and liabilities of Memon Cooperative Bank, the state-run lender said on Tuesday.
"The bank will formulate a scheme for the take over, which will be subject to further approvals of the appropriate competent authorities," BoB informed the exchanges.
The operations of Memon Co-operative Bank, which has 15 branches in Maharashtra and three in Gujarat, have been suspended since May 2009 due to its precarious financial condition. Memon has a total of 225 employees.
On the reason for the takeover, Chairman and Managing Director M D Mallya told Business Standard: "We will get a network of 18 branches located in good locations in Mumbai and Gujarat.
We will also get a clientele of 1,40,000."
BoB management does not expect that taking over the troubled bank would impact its financial health because of the small loan-book size. The loan book of Memon is Rs 200 crore, while it has a deposit base of Rs 290 crore.
Bank of Baroda, in which government has 54 per cent stake, has about 3,200 branches in India, with Gujarat and Maharashtra contributing 34 per cent of its total branches.
BoB plans to increase the branch network by 400 by the end of the current financial year.
As on June 30, total business of the bank was Rs 4.4 lakh crore, with Rs 1.85 lakh crore of total advances and Rs 2.54 lakh crore of total deposits. Gross non-performing assets (NPAs) of bank was at 1.41 per cent, while net NPA was at 0.39 per cent.
This is the second instance of a public-sector bank taking over a troubled cooperative bank in as many years.
In 2009, Chennai-based Indian Overseas Bank had acquired Pune-based Shree Suvarna Sahakari Bank, which had bad loans worth Rs 300 crore.