Reserve Bank of India (RBI) approves merger of Akola Merchant Co-operative Bank with Jalgaon Peoples Co-operative Bank

The Reserve Bank of India (RBI) has granted its approval for the amalgamation of Akola Merchant Co-operative Bank with The Jalgaon Peoples Co-operative Bank. This strategic move is set to be enacted from August 28, as announced by the central bank.

Seamless Transition

• The branches of Akola Merchant Co-operative Bank will be seamlessly integrated as branches of The Jalgaon Peoples Co-operative Bank starting from August 28.
• This integration aims to streamline operations and services for customers under a unified entity.

Another Amalgamation Approval

• The RBI had recently given the nod for the amalgamation of Twin Cities Co-operative Urban Bank Ltd with Kranti Co-operative Urban Bank Ltd, signifying a trend of such consolidations in the co-operative banking sector.

RBI’s Master Direction on Amalgamation of Urban Cooperative Banks

• The groundwork for such amalgamations was laid on March 23, 2021, when the RBI issued a master direction outlining guidelines for the amalgamation of urban cooperative banks (UCBs).
• This directive identified three specific circumstances under which proposals for merger and amalgamation would be considered.

Positive Net Worth with Deposit Protection Assurance

Under the first scenario, when the net worth of the UCB proposing to transfer its business to another UCB remains positive, and the UCB intending to acquire the business of the transferring bank commits to safeguarding the deposits of all the depositors of the transferring bank.

Negative Net Worth with Amalgamating Bank’s Deposit Protection

The second circumstance involves a UCB with a negative net worth, wherein the amalgamating UCB voluntarily assures the protection of all depositors’ funds from the transferring bank.

Negative Net Worth with State Government’s Financial Support

In the third situation, if the UCB’s net worth is negative and the amalgamating UCB guarantees the safeguarding of depositors’ funds from the transferring bank, supported by upfront financial assistance from the state government as part of the merger process, such proposals would also be considered.

Strengthening Co-operative Banking Landscape

The RBI’s proactive stance on overseeing amalgamations in the co-operative banking sector aims to enhance the stability and efficiency of these institutions. By facilitating strategic consolidations, the central bank seeks to fortify the resilience of co-operative banks and provide enhanced services to customers.

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