In a recent development, the Reserve Bank of India (RBI) has granted approval for the voluntary amalgamation of Kranti Co-Operative Urban Bank Limited with The Twin Cities Co-Operative Urban Bank Ltd. This significant move is set to take effect from August 23, 2023, and marks a crucial step in the consolidation of cooperative urban banks.
The RBI’s decision ensures the seamless functioning of The Twin Cities Co-operative Urban Bank branch as a part of Kranti Co-operative Urban Bank from the aforementioned date, guaranteeing uninterrupted operations and services for customers.
Earlier, the RBI had established a comprehensive framework for the integration of Urban Co-operative Banks (UCBs). Introduced on March 23, 2021, this framework serves as a guideline to facilitate amalgamation processes within the UCB sector.
The RBI’s framework outlines three distinct scenarios under which merger and amalgamation proposals are considered:
- Positive Net Worth and Depositor Protection: This scenario applies when the amalgamated bank (the co-operative urban bank transferring its business) has a positive net worth and ensures the protection of all depositors, including those from the transferring bank.
- Negative Net Worth with Self-Insured Depositor Protection: In cases where the amalgamated bank has a negative net worth, the resolving bank voluntarily secures the deposits of all the amalgamated bank’s depositors.
- Negative Net Worth with State Government Support: When the net worth of the amalgamated bank is negative, and the bank voluntarily commits to safeguarding depositors, this commitment is supported by upfront financial assistance from the state government, forming an essential part of the merger process.
This move by the RBI demonstrates its commitment to strengthening and streamlining the cooperative urban banking sector in India.