Merger and Acquisition deals, common among corporates today, are also making inroads in the urban cooperative banking sector.
As per figures available with the National Federation of Urban Cooperative Banks, 19 co-op banks have already merged with stronger banks while nine more are in the pipeline.
According to D Krishna, Secretary, NFCUB, the M and A activity in the sector could increase as the apex bank has already given no-objection certificates for some more mergers.The majority of M&A deals have taken place in Gujarat and Maharashtra which have the largest concentration of co-operative banks.
Banks like Saraswat Bank, Shamrao Vithal Co-op Bank and Cosmos Bank have been the major acquirers so far.The co-operative banking sector with over 1,850 banks and total business of about Rs 2,00,000 crore is infested with weakness.
According to Krishna, earlier, there was no organised attempt to revive the weak banks. They would be subjected to many restrictions and eventually go into liquiditation.
As per the policy announced by RBI in Feburary 2005, urban co-operative banks which are not viable need to exit the banking business either through mergers with strong banks or through voluntary conversion into a co-operative society and withdrawal from the payment system.
If for some reasons, these two options are not possible, the concerned bank would be liquidated.According to bankers, given that there are many weak banks a large number of mergers is a distinct possibility.