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Kotak mahindra Bank to acquire ING Vaisya Bank

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Kotak Mahindra Bank has announced that it would acquire Bengalaru-headquartered ING Vysya Bank in an all-stock deal. The deal will be final after regulatory approvals, including those from the Reserve Bank of India (RBI) and Competition Commission of India (CCI). The management of the banks expects that the new merged entity will be operational by April 1, 2015.

The acquisition will help Kotak Mahindra Bank to widen its reach in South Indian market and also help in acquiring SME customers as ING Vysya Bank was having stronghold in SME customers. After merger the combined banking entity will have a widespread network of 1,214 branches across pan India.

The deal will make Kotak the fourth-largest private bank in the country in terms of total business. The biggest three private banks are ICICI Bank, HDFC Bank and Axis Bank.

Government re-launches Kisan Vikas Patra

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On 18th November 2014, Union Government re-launched Kisan Vikas Patra scheme (KVP) in New Delhi to encourage the habit of small savings among the citizens. The scheme will soon be made available through designated branches of nationalized banks across the country.

The previous KVP was discontinued in 2011. The scheme was very popular among the investors and the percentage share of gross collections secured in KVP after its launch in 1988 was in the range of 9-29 per cent against the total collections received under all National Savings Schemes in the country.

Key facts of the relaunced Kisan Vikas Patra scheme (KVP)

  • Investment: The KVP will be available to the investors in the denomination of 1000, 5000, 10000 and 50000 rupees with no upper ceiling on investment. The scheme will provide facility of unlimited investment by way of purchase of certificate from post office in various denominations.
  • Liquidity feature: Kisan Vikas Patra scheme has unique liquidity feature, where an investor can encash his certificates after the lock-in period of 2 years and 6 months and thereafter in any block of six months on pre-determined maturity value.
  • KVP certificates: The certificates can also be issued in single or joint names and can be transferred from one person to any other person. The investment made in the certificate will double in 100 months. The facility of transfer from one post office to another anywhere in India and of nomination will also be available under the scheme.
  • Maturity period: With a maturity period of 8 years 4 months, the collections under the scheme will be available with the Union Government for a fairly long period to be utilized in financing developmental plans of the Centre and State Governments.

Earlier Kisan Vikas Patra (KVP) Scheme

Earlier Kisan Vikas Patra (KVP)- a certificate savings scheme was launched by the Union Government on 1st April 1988. This scheme provided facility of unlimited investment by way of purchase of certificates from post offices in various denominations.

The maturity period of the earlier scheme when it was launched, was 5 years and six months and the money invested doubled on maturity.

The gross collections under the scheme in the year 2010-11 were 21631.16 crore rupees which was 9 per cent of the total gross collections during the year.

In the year of its closure, the scheme secured gross collections of 7575.95 crores rupees (April 2011 to November 2011).

Implications of new KVP

  • KVP would serve two purposes: Firstly, it would help poor gullible investors to channelise their savings towards trusted government scheme instead of some ponzi schemes. Secondly, it would help to meet the urgent need to raise savings in the country. These savings then would be used for nation building. Thus such saving instrument will not only earn interest but also help in development of the country.
  • Encourage people to save more: In the last 2-3 years, savings rate in country has declined from a record high of 36.8 per cent to below 30 per cent due to slowdown in the economy. So it will encourage people to save more.

Government to revive District Central Cooperative Banks (DCCBs) in four states

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The NDA Government has decided to launch scheme in order to infuse Rs 2,375.42 crore to revive 23 District Central Cooperative Banks (DCCBs) in 4 states, which were on the verge of closure.

Of the total amount, state governments will contribute Rs. 1,464.59 crore, Centre Rs. 673.29 crore and NABARD Rs. 237.54 crore.

Why Government want to save these DCCBs?

  • There are 23 unlicenced DCCBs at district in four states. Among 23 unlicenced DCCBs, 16 are in Uttar Pradesh, 3 each in Jammu and Kashmir and Maharashtra and 1 in West Bengal.
  • These banks were on the verge of closure.
  • They have deposits base of about Rs 6,839 crore and loan book of around Rs 3,774 crore.
  • These deposits are of People from lower strata of society and small businessmen.
  • So, in order to protect interest of these people, government is planning to stop them from verge of closure.

How will government infuse this amount?

  • For the purpose of implementation of the scheme, a tripartite agreement in the form of Memorandum of Understanding (MoU), stipulating conditionalities and deliverables, will be signed between the Centre and state and NABARD.
  • Centre’s share of Rs 673.29 crore would be released through NABARD as interest-free loan and would be converted into grant on fulfilment of conditionalities/deliverables outlined in the scheme.

Conditionalities are:

  1. Bringing the NPAs to at least half of the current levels by 31st March, 2017.
  2. Making 15 percent growth rate of deposits for next two years.
  3. Drawing up of a monthly Monitorable Action Plan.
  4. Placement of competent CEOs fulfilling ‘Fit & Proper’ criteria.
  5. Putting Corporate Governance Systems in place.
  • The assistance from NABARD would be in the form of loan to the respective state governments under Section 27 of NABARD Act, 1981.
  • During the implementation of the scheme, operations of these 23 unlicensed DCCBs would be closely monitored by NABARD and RBI, so that they meet the licensing requirement within the time frame as prescribed in the scheme

Implications of this decision

  • The scheme will help in revival of these cooperative banks.
  • It will result in protecting the interests of depositors and catering to the credit needs of farmers.
  • Once revived, these cooperative banks would become eligible for obtaining licenses from RBI for continuing their operations in rural areas and would also be able to meet CRAR (Capital to Risk-Weighted Assets Ratio) requirement prescribed by RBI.

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