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Mangaluru-headquartered Corporation Bank has dropped plans to take over the assets and liabilities of the ailing Maharashtra-based Rupee Co-operative bank.
Speaking to BusinessLine on condition of anonymity, a senior Corporation Bank official said: “We are not taking up the (Rupee) proposal.”
The 100-year-old Rupee Bank, India’s oldest co-operative bank, operates 36 branches across Maharashtra, and has accumulated losses of ₹652 crore.
Corporation Bank was the most serious among the prospective suitors for the bank in the two years since it was put under a Reserve Bank of India (RBI)-appointed administrator.
Punjab National Bank and Allahabad Bank had also examined the proposal but had reportedly been asked to drop out early in the race.
Impact on depositors The latest development will affect over 6.30 lakh depositors of Rupee Bank, bringing upon the beleaguered bank the spectre of going into liquidation unless another suitor or some method of reviving Corporation Bank’s interest is found.
Last week, the RBI extended the tenure of administrator Sanjay Bhosale, joint director in the State Sugar Commissionerate, by three months till August 21. He was given this additional charge in May 2013. This is for the fourth time that Bhosale’s term has been extended.
While depositors are permitted to withdraw ₹1,000 a month, Bhosale said that 17,000 of them had been allowed to withdraw a total of ₹54 crore under four categories of the “hardship” clause of the RBI.
Responding to a query on the issue, Chandrakant Patil, Minister for Co-operatives, Maharashtra government, confirmed that Corporation Bank had recently dropped the proposal.
“We are requesting Finance Minister Arun Jaitley to intervene and convince Corporation Bank to revive the proposal,” he said, adding that the three-month extension had given Rupee Bank a breather.
Headcount issue One of the main disputes Corporation Bank had was Rupee Bank’s headcount of 900 people. “It was comfortable with 600, so we are examining whether RBI will give us permission to offer a VRS to 300 employees,” he said.
The government also plans to send a proposal to the RBI to allow Cosmos Bank to run Rupee Bank without a merger.
“Both Cosmos and the Maharashtra government can invest ₹100-200 crore each at low interest rates and bail out the bank,” Patil said, adding that if the model was accepted, many institutions would be saved.
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