Final format of bank with details must reach RBI by March end
KOCHI: At last, the Kerala Bank dream is nearing reality. The Government is said to have received an in-principle go-ahead from the Reserve Bank of India (RBI) for the formation of Kerala Bank, which has been planned to be created through the merger of all 14 district cooperative banks (DCBs) with the Kerala State Cooperative Bank (KSCB).
There were reports quoting the chief minister Pinarayi Vijayan as confirming the receipt of the RBI letter on Wednesday (October 3, 2018). “RBI has instructed the Kerala Government to complete the merger of all constituents, and comply with all regulatory requirements before March 31, 2019, and report the status of the same to the central bank before the close of the current financial year,” Pinarayi Vijayan was quoted as saying.
According to banking sources, RBI must be really keen on areas such as capital requirements and the level of non-performing assets (NPA) to be strictly complied with before Kerala Bank can really take off. With the banking system in India passing through one of its most excruciating times, especially with regard to the bad loan pile-up, RBI is unlikely to look at that area with ‘sympathy’.
“To present a clean balance sheet would be a tougher job than meeting the capital requirement prescribed by the central bank as far as the prospective Kerala Bank is concerned,” a top official with a DCB said while briefing businessbenchmark.news on the challenges before the Kerala Bank.
According to an estimate, around 850 branches and thousands of staff will be left at the disposal of the new bank management to be accommodated effectively and with political correctness – which will be a challenge of a tall order.
The Sriram Committee report, the real blue print on the new bank that has been in the public domain for more than a year now, has hinted at the government’s exclusion from being a shareholder in the new format as its shareholding in the cooperative banking system will most likely be converted into debt (subordinated) in the new bank.