June 15, 2021
Reserve bank of india

The Reserve Bank of India (RBI) vide it’s Circular dated May 24, 2021 has issued Guidelines for the Amalgamation of District Central Co-operative Banks (hereinafter referred to as DCCBs) with State Cooperative Banks (hereinafter referred to as StCB). The notification has been issued in furtherance of the Banking Regulation (Amendment) Act, 2020[1], notified by the Government of India on December 23, 2020, which provided that the amalgamations of the above Banks have to be sanctioned by Reserve Bank of India in terms of the provisions of the Section 44-A read with Section 56 of the Banking Regulation Act, 1949.



Co-operative Banks are small scale financial institutions which facilitate lending services to small businesses in urban and rural areas. They are regulated by the Reserve Bank of India and The Banking Regulation Act, 1949. The StCBs are apex form of cooperative banks and are operated at state level and multi-state level. Whereas, the DCCBs are the link between StCBs and primary credit societies being operated at district level.

The main objective behind the present Guidelines of merging co-operative banks is to stabilize the increasing losses and management resources.


The Guidelines inter alia provides for the regulatory criteria for amalgamation, considerations governing the in-principle approval by RBI, Post- amalgamation requirements and the actions to be undertaken by StCBs, Disclosures etc.

  • The amalgamation of the DCCBs with StCBs shall be on the basis of regulations and guidelines formulated by RBI to help the States in taking measures for the two-tier short-term co-operative credit structure :
  • A state may make a proposal by arranging a study on the legal framework of amalgamating one or more DCCBs with the StCBs. This includes additional capital infusion strategy, assurance regarding financial support if required, projected business model with clear profitability and proposed governance model for the amalgamated bank.
  • Proposal shall be thoroughly looked into and recommended by National Bank for Agriculture and Rural Development (NABARD) which oversees the regulation and licensing of regional rural banks and apex cooperative banks in India.
  • The proposal of amalgamation needs to be in compliance of Section 44A and Section 56 of The Banking Regulation Act, 1949. The amalgamation proposal needs to get approved majority of shareholders to be considered by the RBI.
  • To regulate the amalgamation, RBI shall examine the proposal in consultation with NABARD by formulating a two-stage process:


  1. The ‘in-principal’ approval shall be given by the fulfilment of general consideration laid down by RBI for any amalgamation of co-operative banks. These include:


  1. Compliance of Section 44A and Section 56 of The Banking Regulation Act, 1949 for passing amalgamation resolution with majority votes of shareholders.
  2. Execution of Memorandum of Understanding by the respective bodies, i.e. DCCBs, StCBs and the state. It shall include various including organisational structure, tax management, policy of distributing shares on by the basis of share swap ratio etc.
  3. The share swap in the amalgamating body shall be based on the share swap ratio on net worth and at least one share shall be ensured to shareholders on the basis of it.
  4. Performance of Due Diligence by professionals for arriving the net worth of the amalgamating bank.
  5. Adherence of Capital Adequacy ratio (CAR) or Capital to Risk Weighted Asset Ratio (CRAR) norms.
  6. The StCBs shall include all necessary services and facilities provided by the DCCBs post amalgamation.
  7. Set up a Board of Directors and Board of Management[2] within 3 months post amalgamation.
  8. Take all necessary licences and regulatory approvals from RBI to institute the service of amalgamating body.
  9. The assets and liabilities of the transferor DCCBs will be transferred to StCB on the date of the amalgamation as advised by Reserve Bank while according final approval for the amalgamation.


  1. The final approval shall be given by RBI and NABARD after the completion of all the general considerations proposed by RBI. For sanction of the amalgamation plan, all the necessary requirements as given in the annexure shall be followed.[3] A compliance report with reference to the conditions of the final approval for amalgamation shall be submitted to the RBI. The amalgamated entity shall make disclosures in its first annual accounts post- amalgamation as well.


The amalgamation of DCCBs with StCB would lead to allow the Co-operative Banks to function like any other commercial bank and ensure a robust rural credit system which shall increase profits and improve management resources.





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