Chandigarh, Jan 8: Facing mounting losses and repeated capital support to district cooperative banks, the Punjab government has revived its push to merge 16 district central cooperative banks with the Punjab State Cooperative Bank, with the proposal now under consideration by the Reserve Bank of India.
Senior officials from the finance and cooperation departments, led by Finance Minister Harpal Cheema, recently held meetings with RBI officials in Mumbai, where they flagged concerns over capital adequacy and operational sustainability of district-level cooperative banks.
“The aim is to build a single, financially viable cooperative bank capable of competing with commercial lenders,” an official involved in the talks said. “Fragmentation has weakened the system and increased the burden on the state exchequer.”
While the state initially sought approval to merge all 20 DCCBs with the PSCB, officials said the RBI is likely to examine a modified proposal covering only 16 banks that have already passed resolutions supporting voluntary amalgamation.
The four remaining banks — Jalandhar, Kapurthala, Hoshiarpur and Nawanshahr — are currently engaged in litigation against the merger, making their inclusion legally complicated. “Given the court cases, the regulator is unlikely to proceed with a blanket amalgamation,” an official said.
Under existing arrangements, the state government has repeatedly stepped in to recapitalise loss-making cooperative banks whenever their CRAR slips below regulatory norms. Officials argue that a consolidated structure would improve profitability and reduce administrative overlap.
The merger plan has been under discussion for nearly a decade. It was first proposed in the 2017 Budget and received cabinet approval the following year. In December 2020, the RBI granted in-principle consent, conditional upon unanimous approval by all DCCBs.
After four banks refused consent, compulsory amalgamation orders were issued but later stalled following legal challenges and an advisory from the RBI in 2021 stating that the merger could not proceed under those circumstances.
Since returning to the RBI with a revised proposal, the AAP government has maintained that the traditional district-centric cooperative model is no longer viable in the current banking environment. “What worked decades ago is struggling today,” a senior official said, adding that consolidation was essential for the survival of cooperative banking in Punjab.
