RBI issues guidelines for merger of district central co-op banks with state co-op banks

• 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.
• 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.

Approval of 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.
• Approval will be given in two-stages:

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