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Kerala bank: Setback for government as Malappuram DCB vetoes merger proposal

Cooperative Minister Kadakampally Surendran told ‘Express’ the remaining 13 DCBs had cleared the merger proposal with a simple majority.

Published: 08th March 2019 03:16 AM  |   Last Updated: 08th March 2019 03:16 AM   |  A+A-

Express News Service

KOCHI:  The LDF Government’s flagship project of merging 14 district cooperative banks (DCB) with the Kerala State Cooperative Bank (KSCB) to form Kerala Bank - the state’s largest banking network – suffered a setback on Thursday after the UDF-controlled Malappuram DCB voted against the proposal. Cooperative Minister Kadakampally Surendran told ‘Express’ the remaining 13 DCBs had cleared the merger proposal with a simple majority.

“In Malappuram DCB, only 24 per cent votes could be secured in the proposal’s favour. The DCB will now have to be excluded as we proceed with the amalgamation of 13 DCBs with KSCB,” he said. Surendran expressed confidence the required processes will be completed with the 13 consenting DCBS to obtain the required licence from the RBI. 

The Cooperative Department had called for general body meetings of the 14 DCBs on Thursday under the supervision of the respective District Collector to clear the merger proposal. “The resolution for merger was defeated at the Malappuram DCB with a vote count of 97-32 at the general body,” said a source at the DCB.

Surendran had earlier indicated of being in talks with Muslim League members who control the majority of member primary agricultural cooperatives in Malappuram for their support ahead of the crucial vote. 
With RBI mandating completion of 19 conditions before March 31, including approval from all 14 DCB general bodies, for granting its final nod to the new bank, it would now be extremely difficult for the state to push through with the process. 

To ease the process of clearing the proposal through various UDF-controlled DCBs, the state government had first, through an ordinance and later with an amendment to the Kerala Cooperative Societies Act, changed the requirement of a two-thirds majority for mergers and acquisitions in the cooperative banking sector to a simple majority. 

The general body meeting scheduled on February 16 was cancelled with a lower court observing it was called without the intended merger resolution vote being mentioned in the agenda.  The Cooperative Department secretary had earlier indicated DCBs which fail to join the proposed two-tier cooperative banking structure with the formation of Kerala Bank will have to transition into Urban Cooperative Banks, thereby losing their district bank status.

The Opposition UDF has long alleged a merger between the loss-making KSCB and successful DCBs will destroy the latter. It had expressed its wish to retain the three-tier cooperative system in the state.

Vote share for the proposal in other DCBs (in %)
Thiruvananthapuram - 84, Kollam - 78, Pathanamthitta - 79, Alappuzha - 69, Kottayam - 66, Idukki - 58, Ernakulam - 65, Thrissur - 69, Palakkad - 69, Kozhikode - 78, Wayanad - 61, Kannur - 77, Kasargod - 68. 

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