Merger may make rural banks stronger

Continuing its policy of consolidating the country’s rural regional banks (RRBs), the Union Finance Ministry is contemplating a move to amalgamate the Uttaranchal Gramin Bank (UGB) with the Nainital Almora Kshetriya Gramin Bank (NAKGB).

“The entity created through the merger would become the second largest bank in Uttarakhand, after the State Bank of India (SBI), in term of total branches,” said a top UGB official. The new bank would have 228 branches, with UGB adding its 159 branches to NAKGB’s 69. The total business of the new amalgamated bank will touch Rs 3,100 crore with SBI continuing to remain the sponsor bank.

UGB, which has a 54.06-per cent credit deposit (CD) ratio — two per cent more than the average CD ratio in the state — registered a profit of Rs 8.71 crore during the last financial year, which was 55 per cent more than the previous year’s profit of Rs 5.60 crore.

DOUBLE IMPACT

• The Union Finance Ministry is contemplating a move to amalgamate the Uttaranchal Gramin Bank (UGB) with the Nainital Almora Kshetriya Gramin Bank (NAKGB)
   
• If the two rural regional banks merge, they would form Uttarakhand’s second largest bank
   
• The new bank would have 228 branches, with UGB adding its 159 branches to NAKGB’s 69
   
• SBI and the state government hold 35 per cent and 15 per cent of shares in UGB, respectively, while Bank of Baroda holds 35 per cent of shares in NAKGB and the state government holds 15 per cent

On the other hand, NAKGB’s net profit was Rs 7.31 crore during the last financial year. “Since both the banks are making profits, the new entity will also do well,” said a top government official. UGB was created through the amalgamation of three smaller banks in 2006. SBI and the state government hold 35 per cent and 15 per cent of shares in UGB, respectively. The Bank of Baroda (BOB) holds 35 per cent of shares in NAKGB while the state government’s holds 15 per cent. Following the amalgamation, BOB’s shares would be transferred to SBI.

“Be it with regard to profit or total business, our bank has shown exceptionally good growth during the past few years,” said UGB Chairman Yashpal Arora.

UGB’s business reached Rs 1,748.06 crore with a growth of 15 per cent last year, against a business of Rs 1,520.85 crore in the previous year. The bank’s net non-performing assets have also fallen by six per cent to 4.72 per cent this year.

The ban’s deposits bank have touched Rs 1,134.68 crore, against Rs 984.18 crore last year.

The bank is also providing an insurance scheme of Rs 1 lakh to all its account holders. “UGB is the only bank which is offering this scheme to all our customers in the hill state,” said Arora. “In a nutshell, we are now competing with all the commercial banks.”