In a recent development, the Reserve Bank of India (RBI) has granted its approval for the voluntary amalgamation of Twin Cities Co-operative Urban Bank Ltd with Kranti Co-operative Urban Bank Ltd. The amalgamation scheme is set to take effect from August 23, 2023. This decision, as outlined in an official release from the central bank, marks a significant step in the consolidation of cooperative urban banks.
Seamless Transition and Functionality
The RBI’s decision further entails that the branch of Twin Cities Co-operative Urban Bank will seamlessly operate as a branch of Kranti Co-operative Urban Bank starting from August 23, 2023. This move ensures a smooth transition of operations and services, providing customers with continued access to banking facilities without interruption.
Framework for Amalgamation of Urban Cooperative Banks
The RBI had previously established a comprehensive framework for the amalgamation of Urban Cooperative Banks (UCBs). This framework, introduced on March 23, 2021, serves as a guideline for facilitating amalgamation processes in the UCB sector.
Three Key Circumstances for Merger and Amalgamation
The framework presented by the RBI outlines three distinct circumstances under which proposals for merger and amalgamation are considered:
Positive Net Worth and Depositor Protection: When the amalgamated bank (the UCB transferring its business) possesses a positive net worth and commits to safeguard the deposits of all depositors from the amalgamating bank (the UCB acquiring the business).
- Negative Net Worth with Self-Assured Depositor Protection: In cases where the amalgamated bank holds a negative net worth, the amalgamating bank voluntarily ensures the protection of deposits for all the depositors of the amalgamated bank.
Negative Net Worth with State Government Support: In scenarios where the net worth of the amalgamated bank is negative, the amalgamating bank pledges to safeguard the deposits of the amalgamated bank’s depositors. Additionally, this commitment is supported by upfront financial assistance from the State government, forming an integral part of the merger process.