RBI issues new norms for co-op bank mergers

Or else, two banks can merge when the networth of acquired bank is negative but the acquirer bank on its own assures to protect deposits of all the depositors of the acquired bank, the central bank said. The merger can also take place when the networth of the acquired bank is negative and the acquirer bank assures to protect the deposits of all the depositors with financial support from the state government extended upfront as part of the process of merger.

RBI has said all cases of merger and amalgamation, the financial parameters of the acquirer bank post-merger will have to conform to the prescribed minimum prudential and regulatory requirement for urban co-operative banks.

The realisable value of assets will have to be assessed through a process of due diligence.

While considering such proposals, RBI will confine itself to the financial aspects of the merger and to the interests of depositors as well as the stability of the financial system.

It said a cooperative bank can merge only with another cooperative bank situated in the same state or with a cooperative bank registered under Multi- State Cooperative Societies Act.

RBI said any cooperative bank which wants to merge will have to make an application for merger giving the proposed scheme to be submitted by the banks concerned to the Registrar of Cooperative Societies/Central Registrar of Cooperative Societies (RCS/CRCS).

The acquirer bank will also forward a copy of the scheme to the central bank along with the draft scheme, valuation report and other information relevant for consideration of the scheme of merger.

RBI will then examine the scheme with reference to the financial aspects and the interests of depositors, based on the criteria/factors and convey its decision to the concerned State RCS and in case the acquirer is a multi-state cooperative bank, to the CRCS and the RCS of the State in which the acquired bank is situated.