THIRUVANANTHAPURAM: Kerala Bank is set to become a reality finally as it has received the Reserve Bank of India’s (RBI) green light after a three-year wait. The central bank on Wednesday gave state government the nod to start Kerala Bank --- an amalgamation of district co-operative banks --- upon meeting six conditions. The state has not set any specific date for starting the bank’s operation.
Kerala Bank will be formed by merging more than 800 branches of district co-operative banks (DCBs) in 13 districts into the Kerala State Cooperative Bank (KSCB). The Malappuram DCB has chosen to stay away.
Following the merger, the cooperative banking sector will become a two-tier structure with Kerala Bank on top and Primary Agriculture Credit Societies at the bottom.
Kerala Bank will be subjected to the RBI’s banking norms, including maintenance of capital adequacy ratio at 9 per cent. The ratio measures the bank’s financial strength in absorbing losses.
“The co-operative sector has been waiting for Kerala Bank’s formation for long,” said Minister for Co-Operation, Tourism and Devaswoms Kadakampally Surendran. He said the merger of DCBs will be subjected to resolution of cases before the High Court regarding amendment to Section 14 A of the Kerala Co-operative Societies Act.
The amendment pertains to the transfer of assets and liabilities to the KSCB through a resolution passed by members of DCB by a simple majority instead of two-third majority as stated in the original law.
The minister said the government would inform the court on RBI’s approval and proceed with the merger proceedings.
He said Malappuram DCB would be given another opportunity.
Kadakampally Surendran said: “Many had doubts on Kerala Bank. The RBI nod should make them rethink.” He said the bank would have been a reality by now had not the opposition made a political issue out of it.
The RBI nod came after the state government agreed to 19 conditions put forward by the banking regulator in October 3, 2018. The state government had formed a special task force of experts, headed by M S Sriram, for the formation of the Kerala Bank. The state expects the bank to have a deposit of Rs 60,000 crore.
SIX RBI CONDITIONS
State must ensure that Kerala Bank maintains 9 per cent capital adequacy ratio (CAR). A shortfall of Rs 97.92 crore as per NABARD report in 2018 shall be tied over by government before the merger KSCB to frame a transfer price system for fixing the share capital for member units of DCBs post-merger
The director board of Kerala Bank should have a representative from non-lending units without voting power
The structure and powers of the board of management should follow the guidelines applicable to an urban co-operative bank
POST MERGER
The branches should have a customer-friendly software for its services
Kerala Bank CEO should be selected by following a proper criteria. The governing board should have two professionals DCBs shall surrender its licences to the RBI and apply for fresh for branch licences. The branch shall be moved only with prior approval
The approval for bank remains till March 31, 2020. The renewal is subjected to NABARD’s report