Date:03/02/2005 URL: http://www.thehindubusinessline.com/2005/02/03/stories/2005020302600600.htm

Back RBI prescribes norms for merger of UCBs

Our Bureau

Mumbai , Feb. 2

THE Reserve Bank of India has said that it will consider proposals for merger and amalgamation among urban co-operative banks (UCBs) when the net worth of the acquired bank is positive and the acquirer bank assures to protect entire depositsof all the customers of the acquired bank.

In its guidelines for mergers between UCBs, the central bank has said that merger proposals will also be considered in cases where the networth of acquired bank is negative, but the acquirer bank on its own assures to protect deposits of all the customers of the acquired bank.

Cases where the networth of the acquired bank is negative and the acquirer bank assures to protect the deposits of all the customers with financial support from the State Government extended upfront as part of the process of merger will also be considered.

The central bank has said that in all cases of mergers and amalgamation, the financial parameters of the acquirer bank post-merger will have to conform to the prescribed minimum prudential and regulatory requirement for urban co-operative banks.

The realisable value of assets will have to be assessed through a process of due diligence.

While considering such proposals, the RBI will confine itself to the financial aspects of the merger and to the interests of depositors as well as the stability of the financial system.

A co-operative bank can merge only with another co-operative bank situated in the same State or with a co-operative bank registered under Multi State Co-operative Societies Act, according to RBI.