ICICI bank to get control RRBs branches sponsored by BoR

ICICI Bank, India's largest private sector bank will gain more from merger of the Bank of Rajasthan. Apart from getting hold of 468 branches, it will also get control of 58 branches of a regional rural bank sponsored by BoR.

The regional rural bank (RRB) sponsored by BoR is Mewar Aanchalik Gramin Bank (MAGB). The RRB was set up in 1983 and has branches spread across three districts — Udaipur, Rajsamand and Pratapgarh in Rajasthan.

ICICI Bank as the new sponsor of MAGB will be able to step into BoR’s shoes as all other things get equal.

But ICICI Bank's ‘foreign-owned, Indian-controlled' tag might create problem in carrying out a change in sponsorship of MAGB. The bank might have to face the legislative hurdles as RRBs were established under the provision of an Ordinance promulgated on September 26, 1975, and the RRB Act, 1976.

Except MAGB, J&K Gramin Bank (sponsor: J&K Bank Ltd) and Kshetriya Kisan Gramin Bank (sponsor: UP State Co-op Bank), all other RRBs are sponsored by public sector banks/ associate banks of State Bank of India. In India there are 83 RRBs.

In RRBs there is a joint owner ship of Government of India, the State Government concerned and the sponsor bank with the issued capital being shared in the proportion of 50 per cent, 15 per cent and 30 per cent, respectively. The RRBs were set up to ensure sufficient institutional credit for agriculture and other rural sectors.

After merger with BoR, ICICI bank will be the new sponsor of MAGB. According to Mr Pramod Kumar Sharma, General Secretary, All-India BoR Officers Association, but the doubtful point is whether the Government and the Reserve Bank of India will allow a ‘foreign-owned, Indian-controlled' bank to become the sponsor of a RRB. However there is no robust between the working culture of ICICI Bank with either BoR or MAGB, said Mr Sharma.

On the other hand the United Forum of BoR Unions has written a letter to the Reserve Bank of India and has asked it to intervene to stop the merger of BoR with ICICI Bank on grounds of violation of established norms of corporate governance.

The forum pointed out that the dominant shareholder group (the Tayal Group) and allied entities proposed the merger of BoR with ICICI Bank in a secret manner on May 18 through a swap (25 equity shares of ICICI Bank for 118 equity shares of BoR) while they have been disqualified by SEBI through an interim ex-parte order (issued on March 8) from dealing in the market with immediate effect.

Meanwhile Mr Vishwas Utagi, General Secretary, All-India Bank Employees Association has demanded for an investigation into insider trading in BoR shares by SEBI. He has maintained that the merger deal between two banks was finalized in the early hours (0430 hrs) of May 18, but the same was not disclosed until 5 p.m. to the three stock exchanges — Jaipur Stock Exchange, Bombay Stock Exchange and National Stock Exchange — on which BoR is listed.

Also, according to RBI guidelines, private sector banks have to make sure that the decision on merger must get the approval by two-thirds majority of the total board members and not those present alone.

An association representative said, on May 18, out of the total 15 directors on the BoR board, 12 members attended the board meeting. From those 12, seven directors voted in favor of the merger, five abstained from voting.