RBI Issues Norms for Merging District Co-operative Banks with State Entities
The Reserve Bank of India (RBI) has notified the Banking Regulation (Amendment) Act, 2020, with effect from April 1, 2021. As per the Regulation, the RBI will consider proposals for amalgamation of district central co-operative banks with state co-operative banks when a state government makes a proposal to amalgamate one or more district central cooperative bank in the state with the state cooperative bank after conducting a detailed study of the legal framework. The proposal must also include provisions in place for additional capital infusion strategies, financial support assurances as required, the projected business model, and the proposed governance model for the amalgamated bank. Any scheme for amalgamation must be approved by the requisite majority of stakeholders.
The approval process for a proposal involves two stages. An 'in-principle' approval will be accorded at the first stage, subject to the fulfilment of certain conditions, following which the processes for amalgamation may be initiated. After the completion of the first stage, the proposal will have to be finally approved by the RBI and the National Bank for Agricultural and Rural Development (NABARD).