The Punjab Cabinet has okayed the merger of 20 District Central Cooperative Banks (DCCBs) with the Punjab State Cooperative Bank (PSCB) to strengthen the state’s rural credit system and facilitate farmers taking credit from cooperative banks.
With the Cabinet giving the green signal to change the state’s three-tier Cooperative Credit Structure into two-tier by amalgamating the DCCBs with the PSCB, the latter has now become a larger entity bank. This has paved the way for PSCB to play a greater role in the area of rural credit, according to an official spokesperson.
The spokesperson said the decision had been taken in view of the RBI guidelines, which mandate that all DCCBs should have a minimum capital adequacy ratio of nine per cent.
To meet the capital-to-risk weighted assets ratio (CRAR) stipulation mandated by Reserve Bank of India for the Cooperative Banks, the state government had to infuse capital amounting to Rs 307 crore in the past. With this merger, the Cooperative Bank in the state will emerge a financially and structurally stronger entity.
After amalgamation, the single entity will have capital adequacy in the range of 13-14 per cent, allowing Cooperative Banks to increase their business while meeting RBI’s stipulation of capital adequacy.
It would increase the profitability of the Bank and help it to adopt the latest technology and give better delivery services to its customers as well as the farmers of the state.
There are around nine lakh farmers who are holding Kisan Credit Cards of the Cooperative Banks in the state and are dependent on credit in the prevalent Cooperative Structure.
Notably, the amalgamation of the DCCBs with the Apex Bank would be largely beneficial for ensuring maintenance of CRAR on a regular basis, enhance the profitability of the Cooperative Banking Structure in the state, increase regular flow of credit to the farmers, curtail the cost of computerization, and other administrative expenses besides better tax compliance and human resources management.