Date:15/03/2005 URL: http://www.thehindubusinessline.com/2005/03/15/stories/2005031502460600.htm

Back Revokes RRB merger

Our Bureau

Mangalore , March 14

THE board of directors of Corporation Bank, which had approved the merger of Chikmagalur Kodagu (CHIKO) Grameena Bank - a regional rural bank (RRB) sponsored by it - with the parent in a meeting on March 2, has revoked the merger proposal due to `technical requirements'.

The board, which met on March 12, has decided to revoke the merger proposal.

Sources in the bank said that the bank has to fulfil some `technical' requirements as the present guidelines does not permit such a merger. They said the March 2 board meet had decided to merge the RRB with the bank as the Finance Ministry was in favour of such mergers. The Finance Ministry's inclination is to merge RRBs with parent banks or to form a separate State-level entity after amalgamating all the RRBs in a State. However, the RBI feels that such an initiative could be taken up only with amendments to Banking Regulation Act.

Sources said that merger of the RRB with the bank needs even the consent of the Karnataka Government, which has a stake in CHIKO Bank.

The Government of Karnataka has a 15 per cent stake in the rural bank. The Centre holds 50 per cent stake, and the promoter Corporation Bank holds 35 per cent stake .

However, sources said that the decision for the merger of CHIKO Bank with Corporation Bank has been kept in abeyance for the time being.

CHIKO Bank has presence in those rural areas where there is good potential for advancing agriculture credit. Sources felt that a successful merger of the two would have brought nearly 50 branches of the RRB into the basket of the bank.