By our correspondent, Surat/Gandhinagar, 5 April 2013

Reserve Bank of India (RBI) has given green signal to proposal of merger of Surat’s Udhna Citizen Co-operative bank with Ahmedabad’s Kalupur Commercial Bank. However formal procedures will take place only after Governor approves the bill passed by Gujarat assembly unopposed in recently concluded budget session.

Kalupur Commercial Cooperative Bank was facing technical problem in completing the merger process, because of its status of multi-state cooperative bank. In view of this and other similar cases, the Gujarat government tabled an amendment bill in assembly recently. The bill allowing multi state cooperative banks to merge with state cooperative bank was unopposed passed and was sent to Governor for her node to it. Meanwhile RBI was informed about this move. RBI has given its consent to merger of banks, with condition that it would take place only after Governor approves the bill, and it is converted into law.

Udhna Citizen Cooperative Bank has five branches in Surat with Rs 92 crore deposit. Bank’s government security and fix deposit is Rs 67 crore. After RBI’s imposition of 35-A restrictions, bank has recovered Rs 22 crore. Bank’s current loss is down to Rs five crore now. The bank has more than 50,000 depositors and 77,000 share holders.

Gujarat Cooperative Societies (second amendment) bill proposes to allow multi-state cooperative society, registered under 1984 law to merge with other society.

Seven bank merger applications are presently pending in Gujarat. These banks involve 5,722 depositors – each of them having more than Rupees one lakh deposit in bank account. A depositor in a bank is insured upto a maximum of Rs.1,00,000 (Rupees One Lakh). If banks go to liquidation process, deposits worth Rs 23080.50 lakh of these 5722 depositors would have been lost. But if these banks go through merger process, deposits could be saved. Moreover there was also a question of future of 300 employees working in these banks. Therefore the bill was tabled and passed.

So far 32 cooperative banks have completed merger process in Gujarat(but not multi-state bank merger), safeguarding Rs 488.44 crore deposits of 347313 depositors. Jobs of 890 employees were saved through merger process. These banks had to collect Rs 113.72 crore, out of which Rs 84.46 are collected. Thus the experience of merger has been good so far, and banking activity has not seen adverse results of merger process.

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