The Reserve Bank of India (RBI) has refused to sanction the merger of the Rupee Cooperative Bank with the Maharashtra State Cooperative Bank (MSCB). The proposal which was submitted in 2020 will prolong the woes of the Pune headquartered cooperative bank which is under restrictions since 2013.
In view of the growing bad loans, the RBI had superseded the board of directors of the bank and put severe restrictions on it. A board of administrators headed by Sudhir Pandit has been managing the bank since then, trying to either revive or merge the bank. Earlier, there were proposals of the merger of the bank with public sector banks but they came to nought given the then precarious situation of the public sector banks. In the meantime, the board of administrators had taken multiple steps which included criminal action and acquisition of properties of defaulters to recover the losses.
The proposal of merger with the MSC bank was submitted in view of the later wish to diversify into the retail business. MSC bank is the apex cooperative bank that lends money mostly for agriculture and agri-businesses. However, given the risks attached to the business, the MSC bank had decided to diversify its portfolio and venture into the retail business. With this in view, the bank had submitted proposals to merge both the Rupee Cooperative bank and the Mumbai-based Citi Cooperative Bank.
After examining this proposal for two years wherein the apex bank had asked for a revision in the same, the final decision was taken not to allow the merger. Pandit said the move was not entirely unexpected.
“The decision of the RBI is not totally unexpected. It may be because of policy issues. It may set a precedent. It is necessary to mention here that there are no shortcomings or lacunae in the merger proposal. Rupee Bank has good business potential. We will continue our efforts for its merger with other strong banks, or its conversion into the Small Finance Bank or its revival. It is a matter of satisfaction and hope that bank’s high-value depositors which are not insured are extending their cooperation for our endeavour and awareness on the political front is a welcome sign,” said Pandit.
As of July 31, the total deposit of the bank was at Rs 1,293.54 crores while the net loss was at Rs 627.40 crores