KOCHI: To begin with, the proposed merger of the district cooperative banks (DCBs) with the Kerala State Cooperative Bank (KSCB) - a good idea on paper which would help the financial institution to fund big projects within the State - is likely to face the stiffest opposition from political parties. For one, political parties use DCBs to reward middle-level workers by giving them positions in their director boards. The merger, if materialises, would eliminate nearly 300 board positions at one go, including those of 14 presidents who enjoy the rank of Cabinet Minister. “I don’t think politicians would easily let go of such prime posts,” said an official who heads a DCB, on condition of anonymity. Each DCB has about 20-21 board members, and a major chunk of them are political nominees. Further, it is pointed out that DCBs could serve the banking needs better under the current format, wherein local officers directly interact their customers within a district. “Under the proposed system, officers will have to serve in any part of the State, which will be resisted by the officers. More importantly, there are chances of disconnect between customers and the new officers who might not be familiar with the locality where they are posted,” pointed out another DCB head.
From the technical point of view also there are issues that need to be looked into. Currently, the DCBs are using separate banking software. The merger would be possible only after functioning all the DCBs are brought under a single software. KSCB president Kurian Joy pointed out that eight DCBs in the State were using the same software as that of the KSCB, provided by Wipro. However, bigger banks like the Ernakulam DCB and Thrissur DCB are using a different software (C-edge by TCS).
“Integration of the software is just one problem. For me, the bigger issue is that the KSCB is a scheduled bank under the Reserve Bank of India. So, we need to strictly comply with the RBI rules.
It is a contradiction that the State Government, which opposes the proposed merger of SBT and SBI, is supporting the merger of DCBs with the KSCB,” Joy added.
Kerala is following a three-tier system, with the KSCB at the top and the 14 DCBs and primary cooperative societies under the KSCB. The merger will reduce it to a two-tier structure. A main advantage of the merger proposal being pointed out is that farmers and small-time borrowers would get loan at lower interest rates. However, a senior officer of a DCB stated that the interest margins earned by the primary cooperative societies and the DCBs could be done away with through
a government circular. “You don’t need the merger to reduce the margins,” he said.
Finance Minister T M Thomas Isaac in his Budget had allocated Rs 10 lakh to set up a committee that would prepare a detailed recommendation for the merger.
After the proposed merger, the bank will have over 800 branches, the most for any single bank in Kerala. As on March 2016, the total deposit base of cooperative banks in the State was Rs 59,734.27 crore, of which Rs 52,813.23 crore was contributed by the DCBs.