As reported earlier by Indian Cooperative a couple of months ago, the Punjab Cabinet has finally approved the merger of 20 District Central Cooperative Banks (DCCBs) with the Punjab State Cooperative Bank (PSCB) on Monday.
With this the state’s three-tier Cooperative Credit Structure would become two-tier. The decision was taken by the state Cooperative Minister Sukhjinder Singh Randhawa at a high-powered meeting held earlier.
It is becoming apparent that the widespread merger of DCCBs with apex body across states have also to do with meeting the RBI’s stipulation on capital-to-risk weighted assets ratio (CRAR).
Kerala, Chhattisgarh, Uttar Pradesh, Jharkhand and now Punjab- States are in a way forced to amalgamate their DCCBs to ensure the fulfilment of RBI stipulation on CRAR. Like in Punjab, after amalgamation, the single entity will have capital adequacy in the range of 13-14 per cent, allowing Cooperative Banks to increase their business while meeting RBI’s stipulation of capital adequacy.
Talking to this correspondent on phone Jaisrat Singh Sandhoo, Vice Chairman of the apex co-op bank in the state said, “There are 20 DCCBs having more than 802 branches all over Punjab, mostly in rural areas of state and this merger is sure to ease credit flow to the rural areas”.
It bears recall that most of the farmers in Punjab are dependent on cooperative banks for loans, which could not be given because of the CRAR issue. The merger of the DCCBs will raise the CRAR to over 12 per cent, which in turn will help the merged bank to enhance business by Rs 8,000 crore.
The DCCBs cater to seven lakh farmers in Punjab and have a total business (advances) of Rs 10,000 crore. Over the years, lowering bank margins impacted their fiscal health, said officials.
Out of 20 DCCBs about six DCCBs are in loss leading to problem in disbursal of loans to farmers, Sandhoo informed. Merger of them with the apex bank would directly benefit the farmers, he added.
The Punjab State Cooperative Bank was established on 31st August, 1949 at Shimla vide registration No. 720 is a principle financing institution of the cooperative movement in Punjab, reads its website. “In 1951 its Head Office was shifted to Jalandhar from where it moved in 1963 to Chandigarh”, it adds.