In a first of its kind initiative, the Kerala Government is forming 'Kerala Bank' by merging all district cooperative banks.
It is expected to be the largest bank in Kerala and proposes to extend credits at competitive rates. It would have a governing body elected by the people.
Kerala Chief Minister Pinarayi Vijayan, while formally announcing the bank's formation on Friday, said that the bank could be able to give loans to priority sectors like agriculture at an interest rate one per cent lower than that of other banks. It is likely to materialise in 2020 as the merger steps were on. The RBI already granted nod for Kerala Bank.
The left-front government in Kerala initiated merger of the cooperative banks after the State Bank of Travancore was merged with the State Bank of India. The government hopes that the merger of all district cooperative banks would strengthen the cooperative banking sector.
However, the decision to form the Kerala Bank by merging district cooperative banks had not gone down well with the Congress as 13 out of the 14 district cooperatives were not governed by pro-CPM governing bodies. The Malappuram district cooperative bank, that is governed by pro-Congress governing body has not yet decided to join the Kerala Bank.
An ad hoc governing body comprising senior officials have been constituted for the bank's formation, which may take up to one year.