Rupee Cooperative Bank merger hits another roadblock, Saraswat bank questions viability

Saraswat Bank, which had submitted its proposal to Reserve Bank of India (RBI) early in January, has raised queries about the loss of business it would face as around Rs 700 crore has been paid to Rupee Cooperative Bank account holders under the directive of the Deposit Insurance and Credit Guarantee Corporation (DICGC).

The board of administrators led by Sudhir Pandit has been trying to revive the Rupee Cooperative Bank or merge it with a stronger bank for a while. Many proposals were received – from Maharashtra State Cooperative Bank, Mehsana Cooperative Bank and others – but the RBI did not give its nod.

When Saraswat Cooperative Bank submitted its proposal, the Deposit Insurance and Credit Guarantee Corporation (DICGC) had directed Rupee Cooperative Bank to start payment of deposits up to Rs 5 lakh into accounts held then in Bank of Baroda. The corporation had asked Rupee Cooperative Bank to collect willingness forms from account holders. Subsequently, 64,024 people had applied and the corporation sanctioned payouts worth Rs 700 crore.

Interestingly, the RBI had given in-principle approval to the merger proposal 45 days after it was submitted.

With the payout being given before the in-principle approval, Saraswat bank has now raised questions about the viability of the merger.

Pandit says the queries raised by Saraswat bank are valid. “RBI has given approval for the merger after almost 45 days. Had RBI given in-principle approval promptly, things would have been different. Due to the refund of deposits of Rs 700 crore, Saraswat Bank has lost business opportunity and this has affected the viability of the proposal. Saraswat Bank may still proceed positively provided its concerns are addressed and requested regulatory comforts are granted by RBI,” he said.

Considering the gravity of the issue, RBI should proactively take a pragmatic approach, Pandit added.