KOCHI: As the cooperative banking sector will transition into a two-tier structure with the proposed formation of Kerala Bank, District Cooperative Banks (DCB) that are opposed to the merger will have to transition into ‘Urban Co-operative Banks’.
And, in the run-up to finish the process before the RBI-stipulated deadline of March 31, 2019, Kerala will be leaving out five dissenting UDF-controlled DCBs: Malappuram, Idukki, Kottayam, Wayanad, and Kasargod as the Kerala Co-operative Societies Act mandates a 2/3rd majority in individual DCB general bodies for mergers and acquisitions. RBI had given an in-principle approval for the merger of 14 DCBs with Kerala State Cooperative Bank, in October.
Co-operative Department secretary Mini Thomas says the State is going ahead with the necessary processes for the planned merger, such as software, account and HR integration, under the guidance of the Kerala State Cooperative Bank.
“Since the government is following the most democratic way in going about the merger, the DCBs, whose general bodies are unable to pass the resolution, will have to be left out for now and have to be re-badged as Urban Banks with new two-tier system,” said Mini.
She added the state always has the option of amending the Act with an ordinance, but it is up to the lawmakers to decide upon it. Take, for instance, the Malappuram DCB, with its 80 primary agricultural societies out of 129 that constitute the general body being controlled by the UDF-allies, the State’s appeal to support the merger was resoundingly defeated at the last general body.
Mini says the process of selecting a service provider for back-end software integration is in its last stages with final orders to be floated soon, which along with auditing of accounts and updated HR policies being decided by sub-committees formed by KSCB with representatives from various DCBs.
Right now, nine DCBs use the ‘Finacle’ sfotware, ‘Datavision’ by two, ‘Virmati’ and ‘Banks24’ by one DCB each.
“We are hopeful of fulfilling all the 18 conditions laid out by RBI by March 31,” said Mini, adding that the department has also invited applications for the post of CEO for the proposed bank. The task force set up by the State for the formation of Kerala Bank under the chairmanship of V R Raveendranath has been dissolved after the RBI.
Banking experts say that it’s wiser for DCBs to merge, giving them more credibility and flexibility, thus enabling them to sustain themselves in the highly competitive environment.