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RBI issues guidelines for amalgamation of DCCBs with StCB

The Reserve Bank of India said it will consider amalgamation of District Central Cooperative Banks (DCCBs) with State Cooperative Banks on the basis of these entities fulfilling various conditions, the most important being a proposal for such an amalgamation from the concerned state government. The clarification from the regulator came in the light of the notification about the Banking Regulation (Amendment) Act, 2020 for the state cooperative banks and DCCBs with effect from 1 April 2021. Amalgamation of such banks need to be sanctioned by the Reserve Bank of India. The RBI has also come out with the guidelines after a few state governments approached it for amalgamation of DCCBs with state cooperative banks as a two-tier Short-term Cooperative Credit Structure (STCCS).  In order to help the states contemplating delayering their STCCS, RBI has issued guidelines to bring the requirements and indicative benchmarks for the amalgamation of DCCBs with the state cooperative banks. These guidelines will also apply for amalgamation of one or more DCCBs with the state cooperative bank or amalgamation of one DCCB with another. The proposal for amalgamation of DCCBs with the state cooperative bank will be examined by RBI in consultation with NABARD and the sanction/ approval will be a 2-stage process. The basic regulatory criteria for amalgamation shall be applicable. A resolution of amalgamation shall be passed by 2/3rd of the majority of the shareholders of the state cooperative bank and each DCCB. An MOU shall be executed by the constituents, that is, amalgamating DCCBs, state cooperative bank, and the state government. Due diligence on the amalgamating entities shall be carried out by chartered accountants.

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