Both the government and the banking regulator are keen to see struggling cooperative banks merging with commercial banks, said a finance ministry official.
Bank of Baroda has already expressed interest in the Mumbai-based Memon Cooperative Bank and send a formal proposal to the finance ministry. There are 53 scheduled co-operative banks in the country.
“Other banks are also expected to start their due-diligence process and identify key targets,” the official said, requesting anonymity. In 2009, an RBI committee had recommended the setting up of an emergency fund to help urban co-operative banks facing liquidity problems. The regulator has not issued licences for cooperative banks since 2004. Banks may be interested in cooperative banks despite their weak finances as these are local-level institutions that can help them achieve financial inclusion targets, which will soon become a key performance measure of public sector banks. Memon Co-operative bank has 18 branches across Maharashtra and Gujarat. “The bank has a networth of Rs 244 crore. We’re sure it will add to our strength in these two states,” said a senior Bank of Baroda official, who asked not to be named. The banking regulator had suspended the operations of Memon co-operative bank in May last year because of its huge liabilities. Small size of the cooperative banks makes them attractive for large public sector banks. As per RBI, 27% of co-operative banks had deposits less than Rs 10 crore as at end March 2009. RBI allows takeover of urban co-operative banks in consultation with the state government, as they are jointly regulated by the central bank and the registrar of cooperatives. The banking regulator classifies co-operative banks under four grades. Those banks which have 15% net non performing assets (NPAs) or bad loans, and have incurred losses for three consecutive years are termed as sick banks. The RBI assesses cooperative banks on the basis of statutory inspections at periodic intervals. The assessment is based on CAMEL model, which involves scrutiny of capital adequacy, asset quality, management of the bank and use of technology. Last year, the government had initiated the process of consolidation among public sector banks on grounds that the move will enhance the competitiveness and performance of Indian banks while reducing the risks. It had called the chairmen of five public sector banks to kick start discussions on the possible merger deals in the sector. The banking trade unions, however, were against the move and had threatened to go on strikes. As a result, the plan has not made much progress. |
No comments:
Post a Comment