Saraswat Co-operative Bank has put forward a voluntary proposal to merge the financially troubled New India Co-operative Bank with itself. The proposal, which is awaiting approval from the Reserve Bank of India (RBI) and shareholders of both banks, is aimed at protecting depositor interests and stabilizing the operations of New India Co-operative Bank.
Timeline and Background of the Merger
Saraswat Bank Chairman Gautam Thakur stated that the merger process is likely to be completed by August or September. The move follows strict restrictions imposed by the RBI in February on New India Co-operative Bank, following a ₹122 crore embezzlement scandal involving senior management. The RBI also appointed an administrator to oversee the bank’s operations.
Improvement in Bank Performance Under Administration
Administrator Shreekant reported that the bank’s collection efficiency has doubled over the past four months, and its loan book of ₹1,100 crore remains primarily retail in nature. Despite recent improvements, the merger will involve only a portion of New India Co-operative Bank’s assets being transferred to Saraswat Bank.
Short-Term Strain But Long-Term Stability Expected
The merger is expected to temporarily impact Saraswat Bank’s asset quality and capital adequacy ratio. However, Thakur expressed confidence that the turnaround for the combined entity could be achieved within one to two years. He also projected that the merged bank’s balance sheet could exceed ₹1 lakh crore in the current financial year.
Strong Track Record of Supporting Distressed Banks
Saraswat Bank, the largest urban co-operative bank in India, has previously merged with seven other struggling co-operative banks, safeguarding deposits of over 8 lakh customers. Thakur emphasized that depositors have never faced a loss in such mergers. “It is our responsibility as the largest urban co-operative bank to step in when others are in crisis,” he stated.
No Haircut for Depositors and Transparent Integration
Saraswat Bank has assured that depositors of New India Co-operative Bank will not face any haircut and will be able to withdraw their full funds after the merger. The bank is also conducting due diligence and plans to cooperate fully with the Economic Offences Wing. No shares will be issued to anyone involved in the embezzlement, and a full audit will be undertaken.
Smooth Integration and Share Issue Possibility
The merger is expected to be smooth, with operational synergies likely between the two banks. Thakur also mentioned the possibility of issuing shares to New India Co-operative Bank as part of the process, excluding any individuals linked to the financial scandal.
Confidence in Future Growth
Thakur concluded by reaffirming Saraswat Bank’s capacity to absorb the merger. “Our due diligence is complete, and the RBI is confident in our ability to manage this transition,” he said.
