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After RBI nod, Kerala Bank to be established in 6 months, says minister

The bank is expected to see a merger of around 823 branches of 14 district cooperative banks and the State Cooperative Bank

Gireesh Babu  |  Chennai 

bank merger
Representative image. Illustration: Ajay Mohanty

The Kerala government is planning to launch the in six months by merging the district and state cooperative It received the much-awaited Reserve Bank of India (RBI) nod for the new bank last week.

The new bank is expected to have around 5,300 touch points and a deposit of over Rs 600 billion, said Kadakampally Surendran, minister for co-operation, tourism and Devaswoms.

"The RBI has asked the state government to implement the 19 conditions put forward in the in-principle approval before March 31, 2018, and approach them through NABARD for final approval. We are taking steps to comply with the conditions and the bank will be formed within six months," Surendran told Business Standard.

The bank is expected to see a merger of around 823 branches of 14 district cooperative and the State Cooperative Bank within the time. Initially, its capital is expected to be around Rs 20 billion, he added.

The RBI, in a letter sent to the state government on October 3, has put in place 19 conditions, including that the Kerala State Cooperative Act and rules have to be adhered to during the merger of the cooperative and that the government should ensure that there are no court orders against the merger. Further, the State Cooperative Bank and the district cooperative banks have to prepare a merger programme and it has to be approved in a general body with a certain majority.

ALSO READ: RBI clears setting up of 'Kerala Bank'; state expects Rs 650 bn in deposits

The district and State Cooperative banks and the state government should also enter into an agreement regarding the management structure, governing board, human resources related aspects and the handing over of assets and liabilities. After the merger, the capital adequacy and networth should be as per the RBI regulations. The state government has to compensate any lacunae in this. Further, it has to keep adequate reserves as per the norms.

The merged bank should have the software capabilities to serve the entire customer base. The governing body should have at least two professionals and a board of management should be formed as per the mandates to the urban cooperative banks and the state government has to amend the Acts accordingly.

After the merger, the license for the State Cooperative Bank will continue, while the existing branches of the district banks will become part of the merged bank, for which the State Cooperative Bank should seek license from the RBI. It also has to get clearance from the Deposit Insurance Guarantee Corporation for the merger. The State Cooperative Bank and the district banks have to withdraw their deposits from the treasury in phases. Further, no new cooperative societies should be registered with the name 'bank', it added.

The formation of the would eliminate the double or repeated charges on services, which would help provide loans to customers at a lower interest rate. This is expected to help the agriculture, traditional works and self-employment sectors and help Kerala have deposits and credits within the state. This would also help the cooperative banks to overcome the limitations they face at present by implementing the latest banking facilities. The merger would increase the assets of the proposed bank, which would help it to compete with other banks, feels the government.

Unlike other banks, the deposits in the could be provided as credit within the state, which would help the growth of basic facilities, said the government. The merger would also help in bridging the gap created for a local bank after the merger of State Bank of Travancore with State Bank of India. Further, the primary agricultural cooperative societies would be able to have more powers as a representative of the Kerala Cooperative Bank, the government said.

First Published: Wed, October 10 2018. 18:37 IST
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