Page 18 - Banking Finance February 2021

CO-OPERATIVE BANK NEWS

extension in the timeline to state UCB clearance for this amalgamation with Insurance and Credit Guarantee Corp.
Federations, including the Gujarat the apex regulatory bank, Reserve (DICGC) as per usual terms and
Urban Co-operative Banks Federation Bank of India. conditions," said RBI, in a press release
Ltd (GUCBFL). Once the amalgamation is done, the about The Karad Janata Sahakari Bank.

While welcoming the breather for PSCB will be among the largest banks More than 99% of the depositors of the
UCBs, Jyotindra M Mehta, Chairman, operating in the state with 804 bank will get full payment of their
GUCBFL, observed that since the branches. This amalgamation would deposits from DICGC, according to the
Banking Regulation Act has been then allow the banks to function like banking regulator. The deposit insurance
amended, conferring greater powers any other commercial bank and you get will depend on the nature of
accounts you hold with a bank.
on the Reserve Bank of India (RBI) in ensure a robust rural credit system.
dealing with cooperative banks, the Together, the District Central In general, deposit insurance of Rs. 5
BoM requirement should be done Cooperative Banks (DCCBs) cater to lakh is what a person has across all
away with. nearly nine lakh farmers and they lend accounts with a bank. Say, a person has
a current account that has a balance
"Now we (UCBs) are under full control almost Rs 12,000 crore each year to of Rs. 3 lakh, savings account with a
of RBI. So, where is the need for BoM? farmers. Punjab's Council of Ministers balance of Rs. 2 lakh and fixed deposit
Almost 60 per cent of our Banks are had approved this amalgamation of of Rs. 4 lakh with a bank that is
very small. They can't afford the two these banks with the PSCB in undergoing liquidation, the depositor
power centre structure (Board of December 2018. will receive up to Rs. 5 lakh only.
Directors and BoM)," Mehta, who is Vikas Garg, registrar, Cooperative What happens if the person holds an
also President of the National Societies, told The Tribune that they account in the name of a proprietary
Federation of UCBs & Credit Societies had already received the in-principle firm? Such accounts held under sole
(NAFCUB), said. approval for amalgamation of these proprietorship, too, will be aggregated
As per RBI's guidelines on constitution banks. "However, some conditions with other individual accounts.
of BoM, issued on December 31, 2019, were imposed by the RBI, which have However, if a depositor has an account
the BoM shall comprise persons with now been fulfilled and we have applied as a partner of a firm or a guardian of
special knowledge and practical to the RBI for its final nod. It is a minor or as a director of a company
experience in banking to facilitate expected before the end of the or trustee of trust; such accounts are
professional management and focused financial year in March," he said. not counted with the individual
attention to the banking related accounts. Each of these will have a
activities of the UCBs through As of now, the 20 DCCBs are district- separate insurance of Rs. 5 lakh.
appropriate amendments to their bye- wise independent authorities. After the When a bank goes into liquidation, a
merger, they will become branches of
laws. liquidator is appointed to aggregate all
the PSCB. Garg said this merger of the
"UCBs with deposit size of Rs. 100 crore DCCBs would help arrest the declining the accounts.
and above shall constitute BoM which profit and enable them for better DICGC pays the liquidator the claim
will also be a mandatory requirement human resource management as well amount within two months of receiving
for allowing such banks to expand their as tax management. the list of depositors and the respective
area of operation and open new amounts. If a bank is merged or
branches," the guidelines said. Deposit cover payout acquired by another one, DICGC pays
the acquiring bank. DICGC doesn't deal
depends on type of bank with depositors directly.
District coop banks set to
account The best part is that DICGC insures the
be merged with PSCB On liquidation of any bank the principal as well as interest up to Rs. 5
Punjab is all set to amalgamate 20 depositors are paid from deposit lakh. But the liquidation process takes
district central cooperative banks with Insurance. "On liquidation, every time. It makes sense for depositors to
the Punjab State Cooperative Bank depositor is entitled to repayment of spread their savings across banks up to
(PSCB) by the end of this financial year. his/her deposits up to a monetary the deposit insurance limit so that their
The state has applied for the final ceiling of Rs. 5 lakh from the Deposit risks are spread out. T

18 | 2021 | FEBRUARY | BANKING FINANCE