2. Amalgamation means the
combination of banks into a single
entity. It appears to be same as
merger but the only difference is that
in this, neither of the merging banks
remains as legal entities afterwards.
In this, an entirely new company is
formed by combining all the
resources.
3. 1) APPROVAL BY MAJORITY SHAREHOLDERS
A draft containing the scheme for terms of such
amalgamation is placed before the shareholders of each
of the banking companies concerned separately, and
approved by a resolution passed by a majority (two-
thirds in value of the shareholders of each company,
present either in person or by proxy at a meeting called
for the purpose.
2) NOTICE OF MEETING
Notice of such meeting shall be given to every
shareholder of each of the banking companies concerned
in accordance with the time, place and object as per the
articles of association. It is to be published at least once a
4. 3) CLAIM FOR VALUE OF SHARES
Any shareholder, who has voted against this
scheme or dissents it, shall be entitled to claim
the value of shares determined by RBI in the
event of the scheme being sanctioned by it.
4) ORDER IN WRITNG
If the scheme is approved by the requisite
majority of shareholders in accordance with the
provisions of this section, it shall be submitted to
RBI for sanction and after the sanction, an order
in writing is passed in this behalf, binding on the
companies and all the shareholders.
5. 6) SANCTIONING FOR TRANSFER OF PROPERTY
On the sanctioning of a scheme of amalgamation by the
Reserve Bank, the property and liabilities of the
amalgamated banking company shall, by virtue of the order
of sanction, be transferred and become the property and
liabilities of the banking company which is to acquire the
business of the amalgamated banking company.
6A) ORDER BY RESERVE BANK
The Reserve Bank may, by a further order in writing, direct
that on such date as may be specified therein the banking
company which by reason of the amalgamation will cease
to function, shall stand dissolved and any such direction
shall take effect notwithstanding anything to the contrary
contained in any other law.
6B) DISSOLUTION
The Reserve Bank directs a dissolution of the amalgamated
6. (6C) CONCLUSIVE EVIDENCE
An order under sub-section (4) shall be
conclusive evidence that all the requirements of this section
relating to amalgamation have been complied with. A copy
of the said order certified in writing by an RBI officer will
be a true copy of such order and a copy of the scheme
certified in the like manner shall be admitted as evidence in
all legal proceedings to the same extent as the original
order and the original scheme.
(7) POWER OF CENTRAL GOVERNMENT
Nothing in the foregoing provisions of this section shall
affect the power of the Central Government to provide for
the amalgamation of two or more banking companies under
section 396 of the Companies Act, 1956
No such power shall be exercised by the Central
Government except after consultation with the Reserve
Bank.
7. 1) Not withstanding with any of the previous sections, the
reserve bank may apply to the central bank for the order of
a moratorium in respect of a banking company.
2) Once the order of moratorium is passed by the central
government it leads to staying of all actions and
proceedings against the company for a fixed period with
may not exceed for more than 6months.
3) During the period of moratorium the banking company
shall not make payment to any depositor or discharge any
liability or obligation to any creditor.
4) The reserve bank may prepare a scheme for
reconstruction of banking company or for the
8. 5) The scheme may contain provisions for the matters.
The constitution, name and registered office, the capital assets,
powers, rights, interest, authorities and privileges, the liabilities
, the duties and obligations of the banking company on its
reconstruction or the case may be of the transferee bank.
All the details about the business , property of the transferee
bank should be specified in the scheme with terms and
conditions.
During reconstruction any change or appointment of new
board of directors, of the banking companies or during
authority execution or for the period for which appointment
shall be made.
To give effect to reconstruction or amalgamation or for the
purpose of altering the capital it is important to make
necessary alterations of the memorandum or article of
associations of the banking
Any legal proceedings by or against the banking company or
transferee bank immediately before the date of the order of
moratorium.
Reduction if rights and interest of the members, depositors
and other creditors is done by the reserve bank to the extend
it considers it necessary in the public interest or in the interest
of the members, creditors and depositors for the maintenance
of the business of the banking company .
9. The allotment of shares to members of banking company
before its reconstruction or amalgamation whether their
interest in such shares has been reduced under clause (f) or
not and where any members claim cash and not allotted
money.
Banking company shall pay or grant not later than the
period of 3years from the date on which scheme was
sanctioned and transferee bank shall pay or grant not later
than the expiry of aforesaid period of 3 years to said
employees, the same remuneration and same terms and
conditions of service.
Notwithstanding anything in clause (i) where any employee
of banking company not being workmen within the
Industrial Dispute Act or in writing within one month after
the date on scheme is sanctioned, intimidated their
intention of not working before its reconstruction, the
payment to such employee to which they are entitled will be
admissible to them under the rules of banking company.
10. (6a) A copy of scheme prepared by reserve bank shall be
sent in draft within the specified period to the banking
company concerned in amalgamation for suggestions and
objections.
(b) Reserve bank may make modifications in the draft
scheme after the suggestions received from transferee bank
or banking company concerned in amalgamation.
(7) The scheme shall be placed before the Central
Government and it may sanction the scheme without or
with such modifications as necessary and shall come into
force as specified by Central Government.
(8) On or from the date of coming into operation the scheme
shall be binding on transferee bank, or banking company
concerned in amalgamation and also on all members,
depositors and creditors and employees of those
companies.
11. (9) On and from the date of the coming into operation of, or
as the case may be, the date specified in this behalf in, the
scheme the properties and assets of the banking company
shall, by virtue of and to the extent provided in the scheme,
stand transferred to, and vest in, and the liabilities of the
banking company shall, by virtue of and to the extent provided
in the scheme, stand transferred to, and become the liabilities
of, the transferee bank.
(10) If any difficulty arises in giving effect to the provisions of
the scheme, the Central Government may by order do
anything not inconsistent with such provisions which
appears to it necessary or expedient for the purpose of
removing the difficulty.
(11) Copies of the scheme or of any order made under sub-
section (10) shall be laid before both Houses of Parliament,
as soon as may be, after the scheme has been sanctioned by
the Central Government, or, as the case may be, the order has
been made.
(12) Any business acquired by the transferee bank under
the scheme or under any provision thereof shall, after the
coming into operation of the scheme or such provision, be
12. (13) Nothing in this section shall be deemed to prevent the
amalgamation with a banking institution by a single scheme
of several banking companies in respect of each of which an
order of moratorium has been made under this section.
(14) The provisions of this section and of any scheme made
under it shall have effect notwithstanding anything to the
contrary contained in any other provisions of this Act or in any
other law or any agreement, award or other instrument for the
time being in force.
(15) In this section, "banking institution" means any banking
company and includes the State Bank of India or
