Merger of DCCBs with StCBs

Reserve Bank of India will consider merger of District Central Co-operative Banks (DCCBs) with State Cooperative Banks (StCBs) if the concerned state government will make any proposal.

Highlights

RBI has notified the guidelines for merging DCCBs with StCBs as two-tier Short-term Co-operative Credit Structure (STCCS). Banking Regulation (Amendment) Act, 2020 has also been notified in effect from April 1, 2021 for these banks. Merger of such banks will be finally be sanctioned by Reserve Bank of India.

What are the guidelines?

• As per the guidelines, RBI will consider proposals of merger “when state government will make it” after studying detailed legal framework.
• Guideline mention, there should be an additional capital infusion strategy and assurance with respect to financial support.
• Business model should be projected with clear profitability.
• It also proposed governance model for merging bank.

Who will approve the merger?

Scheme of amalgamation will be approved by requisite majority of shareholders. NABARD in association with RBI will also examine and recommend proposals made by state government.

Stages of approval

Approval will be given in two-stages:

1. First Stage: ‘In-principle’ approval will be given after completing certain conditions. Later, processes for amalgamation will be initiated.
2. Second Stage: NABARD and RBI will be approached for final approval along with compliance report.

Month: Current Affairs - May, 2021