Reserve Bank of India (Rural Co-operative Banks - Voluntary Amalgamation) Directions, 2025

1. In force at once

These Directions came into force with immediate effect.

2. Who is covered

These Directions cover a district central co-operative bank merging with its state co-operative bank, or with another district bank.

1. A general body vote

Shareholders of each bank approve by two-thirds in number and value, present and voting at a general body meeting.

2. Three weeks of notices

Meeting notices run weekly for three consecutive weeks in at least two local newspapers.

1. Strong numbers required

The merged bank needs capital above the minimum, gross bad loans below 7 per cent and net below 5 per cent.

2. A new board quickly

A new board must be formed within three months of the merger.

BankPulse example. Two rural co-operative banks merge at the start of April. A new board must be formed within three months of the merger. So it must be in place by the start of July.

3. NABARD checks first

NABARD must examine and recommend the state's proposal before it reaches RBI.

4. No court shadow

The proposal must be lawful, and the state must verify no court order blocks or stays the merger.

5. Viable on its own

After the merger, the bank must be profit making and financially viable on a sustained basis.

6. Fraud losses provided first

Full provision must be made for asset losses from frauds or misappropriation before net assets are valued.

7. Capital rules continue

After the merger, the bank must keep meeting RBI's capital ratio norms as they stand from time to time.

8. A fit and proper chief

The new chief executive must pass RBI's fit and proper test.

9. RBI decides with NABARD

RBI examines the proposal in consultation with NABARD, and approval comes in two stages.

10. Through the portal

The state government submits the proposal and papers through the PRAVAAH portal.

11. The state leads

The state government makes the proposal, with a legal study, a capital plan and an assurance of support.

12. A clean record

The acquiring bank needs a satisfactory record of regulatory and supervisory compliance.

13. A three-way agreement

The banks and the state government sign a memorandum covering governance, management, staff and the swap method.

14. Net worth by the book

Net worth of both banks is computed under RBI's rural co-operative banks miscellaneous directions.

15. Accountants do the diligence

Chartered accountants carry out the due diligence on the banks being absorbed.

16. A registered valuer prices it

The share swap ratio comes from a chartered accountant firm registered with the insolvency board as valuers.

17. At least one share each

If some shareholders would get nothing, the state government puts in capital so each gets at least one share.

18. Depositors get notice

Depositors of the absorbed banks get notice time to decide whether to keep their deposits.

19. No exit penalty

A depositor who leaves within that window pays no early withdrawal penalty.

20. Deposit insurance clearance

Final approval needs the deposit insurance body's clearance for the merger.

1. Old licences handed back

Licences of the absorbed banks go back to RBI within three months.

2. Every branch relicensed

The bank must apply for licences for every absorbed branch within three months.

3. The licence carries on

The buying bank's own licence simply continues after the merger.

1. Old rules swept away

The old merger guidance for rural co-operative banks stands repealed.