Kerala Chief Minister Pinarayi Vijayan claims to have got a greenlight for the formation of Kerala Bank from the RBI. The Chief Minister says that the state has received a letter from the Regulator on Wednesday. RBI, though is silent on the issue so far with its website continuing to have not a single word on the issue.
Kerala Bank is being set up after merging all the 14 District Cooperative Banks of the state. The RBI has approved the merger into a single entity- the Kerala State Co-Operative Bank and that the state government is going to issue an ordinance in this regard soon.
According to Kerala govt sources the merger go-ahead is conditional as the RBI wants the state to fulfill many criteria before March 31, 2019. The state has to complete the procedures for the merger by following all financial and legal norms and approach the central bank for the final approvals and licences. RBI has set 18 other conditions for establishing the bank.
“This includes a requirement that the state should follow the Kerala Cooperative Societies Act and Rules in effecting the merger. There should not be any court order staying or banning the merger. The Kerala State Cooperative Bank (KSCB) and district cooperative banks (DCBs) are required to present a merger plan before their members. In fact, a merger resolution should be passed with two-thirds majority in the general body”, reports Indian Express.
Further, the banks and the state government should sign a tripartite MoU, which covers details pertaining to governing body, management set-up, human resource and asset liabilities, it adds.
Other conditions include that if the KSCB and DCBs have deposits in the treasury, they should be withdrawn in a phased manner, new cooperative societies that use the term ‘bank’ should not be registered in the state. For final approval, the RBI should be approached via Nabard once the conditions are met.
Earlier, in an exclusive interview Satish Marathe, Director on the RBI Board did not approve of an amalgamated Kerala Bank. The idea of an amalgamated bank has been opposed by many cooperators as well for they see in it a move to stifle the rural credit system, Marathe felt.
One of the RBI conditions is that there should be no court order against the merger. Those opposed to the idea are banking on some of petitions being heard in Kerala High Court against the merger. It is not going to be easy for the Kerala govt to get its idea translated into reality even after the RBI nod, experts opine.
According to a report, out of 14 DCCBs in the state, 12 DCCBs are doing well and earning profits. There is no point piggy riding a loss making bank on the profit making ones, many felt.
Concentration of power into a single entity and the limited reach of the apex Kerala Bank are other issues being debated in this context. These 14 District Cooperative Banks have a network of about 300 branches. Over 64 lakh customers are associated with them.