Mapusa and Madgaum coop banks in merger talks with another coop bank

PANAJI: Punjab and Maharashtra Cooperative Bank Limited (PMC) is in serious discussion with both Mapusa Urban Cooperative Bank and Madgaum Urban Cooperative Bank, over its merger with the two distressed banks in the state.


Officials said that while the process is in the last phase for Mapusa Urban, valuation of Madgaum Urban has just begun.

“PMC is open to merger with both the banks,” an official in the know of the developments said.

Reserve Bank of India (RBI) first imposed financial sanctions on Mapusa Urban on July 24, 2015, and has periodically extended curbs by six months. It had initially prevented customers from withdrawing over Rs 1,000, but from February, it allowed the bank’s customers to withdraw up to Rs 50,000 over a six-month period.

RBI imposed similar sanctions this month on Madgaum Urban Cooperative Bank but has allowed customers to withdraw Rs 5000 in a six month period. RBI has also said if any customer has any unpaid loans, then the money being withdrawn must be used to pay off the loan first.

The curbs, imposed after the capital to risk asset ratio (CRAR) of both banks worsened, prompting their respective managements to opt for the merger route to keep the institutions afloat.

“PMC has finished due diligence and is now evaluating the value of absorbing the bank,” Mapusa Urban general manager Shailendra Sawant, said. “We are expecting a positive result within 15 days.”

An official with PMC said a team from the bank would meet the management of Mapusa Urban in the coming week to hold another round of discussions regarding the possible merger of the two banks. Officials also say RBI has given Mapusa Urban an ultimatum to find a solution to its financial woes by August this year.

Meanwhile, a team of auditors has been studying Madgaum Urban’s balance sheets, accounts and financial books to determine the valuation of the bank and to see if the merger is viable.

“PMC has accepted the proposal for merger. In fact, in January 2018, it had forwarded a memorandum of understanding for the merger after completing its due diligence,” Madgaum Urban managing director Kishor Amonkar, said. “The merger could take place in six months, eight months or even a year, but I expect it to happen soon.”

The merger of the two local cooperative banks with PMC will give the latter a bigger foothold in Goa’s banking space. Currently, PMC has six branches across the state while Madgaum Urban has nine. Mapusa Urban has a total of 24 branches.

“Closure of mining was the death knell for the Goan economy and the first casualty was the cooperative banks,” said former Mapusa Urban chairman Ramakant Khalap, while discussing the reasons for the current financial crisis that has plagued Goa’s cooperative sector.