Kochi: The Kerala Bank, a pet project of the Left Front government, has come into existence on Friday soon after the High Court dismissed a clutch of petitions challenging its establishment by merging all 13 District Cooperative Banks (DCB) with the Kerala State Cooperative Bank (KSCB). An order formalising the birth of the bank was issued by the Kerala government as soon as the High Court made its stand clear.
On Friday, the Kerala High Court stated it was for the Reserve Bank of India (RBI) to examine whether the steps taken for bank mergers resulting in the formation of the Kerala Bank were acceptable. The HC made the observation while dismissing all the 21 petitions that challenged the merger of the banks, citing various grounds.
The RBI had given the nod for the Kerala Bank early in October. However, a few petitioners contended that the norms stipulated by the RBI were not followed.
While pointing out that the RBI was yet to give the final consent, the HC said that it would not intervene in the process before the RBI made its decision.
The court made it clear that unless there are serious lapses in the final clearance to be given by the RBI, there would be no grounds for the judiciary to intervene.
The RBI’s approval is valid for a six-month period.
The High Court also refused to look into the objections raised over the shares of the banks that are being merged. The court, however, made it clear that once the final consent was given, those with any objection could file a complaint.
With regard to the question raised by the petitioners of how scheduled and non-scheduled banks could be merged, the court again left it to the RBI to take the final call on the matter.
Boost for Primary Cooperative Societies
The court refuted the petitioners' argument that the proposed mergers would harm the primary cooperative societies and urban banks that were part of the district banks. It observed that there would only be a change of affiliation from the present District Cooperative Banks to the State Cooperative Bank and that it would ultimately benefit the primary cooperative societies. The mergers will not take away the self-governing status from the societies. Their voting rights in the State Cooperative Bank is a legislative matter, none can intervene.
The Kerala State Cooperative Bank had forwarded the merger proposal to the District Cooperative Banks through the Registrar of Cooperative Societies. It has been discussed in a special committee too. Out of the 14 district banks, 13 have passed resolutions. Resolutions passed in favour of the transfer of assets and liabilities imply approval of the merger proposal. The court said that the administrators of the State and District Cooperative Banks have no role in the merger process.
Amendments not against the Constitution
The HC said that amendments to the cooperative laws to facilitate the merger cannot be considered as unconstitutional.
Cooperative enterprises cannot compete if they are not able to rise up to the market demands. The government contention is that that to compete with modern banks and to improve the financial gains and customer service of the cooperative banks, the merger was a necessity.
Three-tier banking system of primary, district, state level was deemed to be expensive, according to an assessment made by an expert committee led by Professor M S Sreeram. As per the committee's recommendations, the two-tier system, excluding district banks, was given the approval in principal, the court said.
Obstacles removed, claims minister
Thiruvananthapuram: Kerala Minister for Cooperation Kadakampally Surendran has said that all the roadblocks in the formation of the Kerala Bank have been removed with the court dismissing the petitions against the merger.
"All 21 cases before the High Court have been quashed," the minister said.
The integration of employees would be completed by March 31 after holding discussions with the unions. Suitable decisions would be taken on temporary contract workers, daily-wage workers, and labourers working on commission basis, the minister added.
Systemic changes
•The government has decided to appoint Union Bank of India general manager P S Rajan as the CEO of the Kerala Bank.
•Unlike earlier, an interim committee appointed by the government would be tasked with administration. Earlier the district as well as state cooperative banks had administrative powers.
•The committee would have a tenure of one-year. It is scheduled to meet soon.
•The interim committee comprises Cooperative Secretary Mini Antony, Finance Secretary Sanjeev Kaushik, State Cooperative Bank Managing Director Rani George.
•The first general body of the State Cooperative Bank, post merger, would convene soon to discuss the bylaw amendments.
•Unification of the services and products of the state-district cooperative banks would be completed this year itself and implemented from January 1.
•The logo and colour scheme of the new bank would be unveiled after getting the approval of the RBI.
•The employee structure would be revised in line with the new bank. All staff would be given expert training within six months. Policy would be formulated on pay revision, promotion and transfer. The banking policy too would be announced soon.
•The tender process for core-banking unification process would be completed by September. Primary farmer credit societies would be incorporated in this sector in the second phase.