Riverside BANK

Riverside bank was established in Madras in 1900s as an Indian Scheduled Bank and has grown
exponentially until 1954.

The bank wanted to expand to All over India as it was concentrated only in Madras, but due to
restrictions on expansion by RBI it looked at other alternatives of acquiring other banks. Raju was the
Managing Director of Riverside bank

Nagrik was a Scheduled Bank started in Jan 1935. It had been in a loss since 1918 due to its inefficient
management and had not paid dividends on its equity shares and preference shares since 1947.

Nagrik had 43 branches mostly situated in Andhra with a total staff of 325 employees. The head office
didn’t have control over their agents who made excess advances which resulted in bad or doubtful
debts.

The scheme of amalgamation under S.S. 4 of Section 45 of the Banking Companies Act, 1949, gave the
procedures for amalgamation:

• Transfer of Assets, Agreed Basis for Asset Valuation and Liabilities Determination
• Realizable Assets
• Payment of Liabilities based on Specific Parameters

Nagrik raised two issues:

1. Riverside should take over all assets of Nagrik- the readily realizable and the non-readily
realizable assets.
2. Riverside should pay goodwill on account of: tenancy rights and telephonic connection,
accrual of the block of deposits of Rs.2.21 crore and direct and indirect benefits arising out of
the acquisition of a network of 43 branches.

Other issues Raju was concerned about was:

• The academically poor staff of Nagrik and increase in wages by Rs. 20,000 per month.
• The premises of Nagrik were not suitable for Riverside.
• Nagrik did not have branch location in bigger towns which posed lower growth possibilities
for Riverside.
• Nagrik faced competions from Bank of Andhra and State Bank.
• 29% of its depositors had to wait a long period for repayment who were larger and more vocal
groups and the dividends have also not been paid for a long time.
• Ramesh would have to monitor the new 43 branches which would be a difficult task for him.