The Union government has notified amalgamation of South Malabar Gramin Bank (SMGB) and North Malabar Gramin Bank (NMGB) to form a single entity known as Kerala Gramin Bank. The new entity, sponsored by Canara Bank, will have its head office at Malappuram.

The Central government notification, published on Monday, said the amalgamation came into effect on that day. The decision for amalgamation was taken earlier at the highest level earlier, but its date of implementation had been kept in suspense till the notification was issued. One of the corollaries of the amalgamation is the possibility of a similar work-out for the impending merger of some of the State Banks with its parent bank, State Bank of India. State Bank of Tranvancore is one of the probable State banks to be merged with SBI. What is interesting is that the amalgamation of the two regional rural banks had been carried out in a one-day operation, despite the prevailing opposition from the bank employees unions, affiliated to strong national bank employees’ organizations.

South Malabar Gramin Bank, sponsored by Canara Bank, with over 280 branches had been doing more business than North Malabar Gramin Bank. The latter, with over 220 branches, and headquartered at Kannur, was sponsored by Syndicate Bank. The total business of the merged entity will exceed Rs.10,000 crore. The amalgamation was expected as the rural banks in other States had already been merged. The decision was proposed to be executed by March 31 this year, but it got delayed because of the differences in opinion aired by State government, which had 15 per cent stake in the rural bank, sources in the banking industry said.

The total number of regional rural banks in the country has been reduced from 196 to 63 in the last three years. “It is expected to be brought down further,” said Unnikrishnan Kalil, General Secretary of South Malabar Gramin Bank Staff Union. The organization had expressed its opposition to the amalgamation move and had mooted merger with the sponsor bank.

The regional rural banks had been formed to provide more rural lending, but lack of adequate funds had been a setback, he pointed out. Merger with the sponsor banks would have been a better choice as such an entity would have more funds at its disposal, he said. The South Malabar Gramin Bank was catering to 8 districts in the State while the remaining districts were served by the North Malabar Gramin Bank. The latter was serving Ernakulam district, with about 10 branches with several among them operating in city limits. The employees of the rural banks in the State had gone on a day’s strike opposing the merger a year ago.

The North Malabar Gramin Bank Employees Union had demanded a merger with Syndicate Bank, its sponsoring bank, the union general secretary Upendran said.

Viability could be one of the questions behind the merger, observed K.S. Krishna, All India Bank Employees Association leader.

The regional rural banks were conceptualized to serve the rural masses, especially the farming community, but their area of operation was extended to urban locations since the rural economies were not sufficient to sustain the banks.

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