The Hindu Business Line : 5 UCBs in fray for takeover of 2 co-op banks

FIVE leading urban co-operative banks are understood to have approached the Reserve Bank of India for permission to take over two ailing Maharashtra-based co-operative banks - The South Indian Co-operative Bank and Maratha Mandir Co-operative Bank Ltd.

According to banking sources, Shamrao Vithal Co-operative Bank Ltd, Saraswat Co-operative Bank Ltd, Kapol Co-operative Bank Ltd, The North Kanara GSB Co-op Ltd and Abhyudaya Co-operative Bank Ltd have expressed interest in acquiring the two co-operative banks, currently under the directive of the RBI.

Last year, the RBI put Maratha Mandir Co-operative Bank and the South Indian Co-operative Bank, under its `directives' following a run on the deposits of both banks. Both banks were restricted from undertaking any business activities without RBI permission and deposit withdrawals were capped.

Mr Suresh S. Hemmady, Chairman, The Shamrao Vithal Co-operative Bank Ltd, confirmed that his bank was in the race to acquire either one of the two co-operative banks, which had been brought under RBI's directives, freezing all their business last year.

"A number of banks are looking to acquire these two banks. We have done the due diligence on both banks and will put forth our auditors' report to our board this Saturday. The board will take a view on how to bid for the two banks," he said.

Sources said that those bidding for the banks may request RBI and the Registrar of Co-operative societies, to allow them to write off losses of these two banks over a period of time.

Another challenge the acquisition will pose will be that of surplus staff. Sources said that banks were also examining the possibility of reducing excess staff by way of a `golden-handshake'.

Bankers are of the view that the bank that is able to make the best proposal - in terms of retention of employees and absorption of losses - is likely to win the mandate for acquisition.

The advantage of an acquisition for co-operative banks is that it will enable them to expand their presence without having to go through the lengthy process of having to apply for branch licences from the central bank.

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5 UCBs in fray for takeover of 2 co-op banks

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