MDC to become stand-alone bank

MDC to become stand-alone bank

Agency News

Malappuram, Mar 10: Having decided not to become part of the new Kerala Bank, the Malappuram District Co-operative (MDC) Bank will become a stand-alone bank and the only District Co-operative Bank (DCB) in Kerala.

A meeting of the MDC recently voted against forming part of the proposed Kerala Bank, conceived by the ruling LDF Government last year. In fact, all the other 13 district co-operative banks, out of the total 14 DCBs, had decided to merge with the new bank of Kerala.Effectively, the launch of the Kerala Bank, likely in April, would dissolve all the 13 DCBs and the amalgamation of them with its present apex body - the Kerala State Co-Operative Bank, which will also get liquidated and would form part of the Kerala Bank.

This would mean that the MDC, having operations in Malappuram district, would lose its affiliation with the State Co-Operative Bank and thus would become a stand-alone one in the Co-Operative vertical in the State.

It was aimed at having a bank for Kerala, in the wake of the merger of the erstwhile State Bank of Travancore into the State Bank of India, that the Government mooted the idea of consolidating all the district co-operative banks and its apex body, the State Co-Operative Bank, and forming a new entity as Kerala Bank.

Though there has been some technical issues with its formation initially, all of them were since resolved and the formalities of merger of the district co-operative banks have been in full swing since early this year. The Reserve Bank of India (RBI) in October last had accorded in-principle approval to Kerala government to set up Kerala Bank by merging district co-operative banks with state co-operative bank.
The new Kerala Bank will have branches of more than 1,200 spread across the state.

According to the Kerala Government, the prime motive behind the concept of Kerala Bank is to have a bank of its own that would primarily serve the growing needs of funds for the growth and development of the state. The Kerala Government is obliged to submit a report to the RBI by March 31 after complying with all the clauses put forth by RBI and National Bank for Agriculture and Rural Development (Nabard). This would follow with a green signal from RBI and the birth of the Kerala Bank.

With the MDC only voting against, it would be the only DCB that would exist separately even after the formation of Kerala Bank. However, the unfavorable decision by the MDC is likely to create issues in future. It is all likely that the new bank would have its presence Pan-Kerala, vis-a-vis Malappuram also. This might dilute the importance of MDC as its customers may opt a safer and strong entity having wider network.
Moreover, MDC might face problems as the Kerala Bank is unlikely to entertain any internal banking arrangements with MDC, which at present is having networking and mutual operations with other DCBs and State Co-Operative Bank.

By any means, the MDC is likely to be in a disadvantageous position as a DCB, in comparison with its forming part of the Kerala Bank, with a state-wide presence and brand value, thanks to its aversion to form part of the Kerala Bank. UNI