Reported by: banking|Updated: March 25, 2019
Kerala is soon to get a 2-tier cooperative banking framework when 14 district central cooperative banks in the state merge with the Kerala State Cooperative Bank to create a mega bank to be christened Kerala Cooperative Bank. This will the first tier in the cooperative banking structure in the state and the second tier will be the primary agricultural cooperative credit societies (PACS), which will function at the grassroots. The state will continue to have urban cooperative banks. The state government has already dissolved the boards of the DCCBs, and these are now being run by administrators or administrative committees.
The setting up of Kerala Cooperative Bank has been one of the major policy decisions of the Left Front government in Kerala when it came to power in May 2016. It completed legal and technical formalities for the purpose, including a techno-feasibility study, and set up a task force to prepare a report outlining the financial viability of the proposed entity post-merger. This report was the main document that the state government relied on while submitting its application for the merger to the Reserve Bank of India.
RBI has given an in-principle approval for the setting up of the bank. However, the approval came with several conditions – in fact 19 of them – which have to be fulfilled before 31 March 2019, the deadline for the formation of the bank. While some of the conditions are not very easy to implement, the state government is optimistic and maintains that it would meet the target date.