Mehsana UCB rescues depositors of R.S. Bank

Reported by: |Updated: May 27, 2019

The Mehsana Urban Coop Bank, a leading cooperative bank in Gujarat, has acquired R.S. Cooperative Bank of Mumbai, an ailing cooperative bank placed under restrictions by the Reserve Bank of India. The acquisition will see the bank increase its branch count to 53 spanning Gujarat and Maharashtra. R.S. Bank had a substantial negative net worth, and in spite of this Mehsana Bank went ahead with the acquisition. Vinodkumar Patel, CEO of Mehsana UCB, told Banking Frontiers that the bank’s board took the decision largely looking at the interests of the depositors and employees of R.S. Bank. The merger is taking place despite R.S. Bank having a huge loss of Rs220 million. In normal instances of merger, a haircut of up to 60%, or even 75%, can be applied, but as a rare gesture to serve the depositors’ interests, Mehsana Bank took the benevolent decision.

Mehsana Urban Coop Bank had undertaken a similar successful exercise in the recent past. It had acquired Surat Nagrik Sahakari Bank in Surat with 5 branches in 2013.

R.S. Bank had first reported a loss in 2010. Thereafter, depositors of the bank started withdrawing their deposits from the branches and there were several restrictions placed by the RBI. No bank from Maharashtra came forward to take over the ailing bank in spite of sustained efforts by the management. Says Sadanand Nayak, chairman, R.S. Bank: “God had sent help from a distant place, that is, Mehsana. Its board has shown guts to come from a different state and save the bank. I appeal to the depositors of my erstwhile bank not to withdraw their deposits immediately and instead do so on maturity.”