Related Topics: Economy & Banking, Cooperative Banks
The Reserve Bank of India (RBI) has given the go-ahead to the State government to amalgamate 13 district cooperative banks (DCBs) with the Kerala State Cooperative Bank (KSCB) for forming the proposed Kerala Bank.
About Kerala Bank
- With its formation, the proposed ‘Kerala Bank’ will become the largest banking network in Kerala.
- As per the government sources, the objective of the formation of the Kerala Bank is to strengthen the cooperative sector.
- All district banks, except the Malappuram District Cooperative Bank, had approved the scheme of amalgamation proposed by the State government at their respective general body meetings.
- The government may give one more opportunity to the Malappuram bank’s general body to approve the scheme.
- The merger approval would be contingent upon the order of the High Court on a case challenging the amendment to Section 14(A) of the Kerala State Cooperative Societies (KSCS) Act.
- The government would have to complete the stipulations laid for merger and submit a compliance report to the apex bank before March 31, 2020.
- RBI had insisted that the State government should closely abide by the provisions of the KSCS Act and rules at every stage, strengthen the capital of the KSCB to ensure sustained net worth and adherence to capital to risk weighted assets ratio (CRAR) norms, a standard metric to assess balance sheet strength of banks, post merger.
- State government would have to consistently infuse additional capital and also put in place a well-defined governance structure by amending the KSCS Act.
- The government submitted a compliance report to the RBI in March 2019 and the final approval for amalgamation of 13 district banks was accorded.