CRDB Bank has recapitalised Tandahimba Community Bank (TaCoBA) by injecting 3.2bn/- and sustained the bank operations.
The two banks signed the MoU yesterday and lifted TaCoBa from the verge of callapse because of insufficient capital.
The community bank had up to the end of this month to increase its core capital base or risking licence revoking by the regulator - the Bank of Tanzania (BoT).
CRDB Managing Director, Dr Charles Kimei, said the capital injected will be paid when TaCoBa sells new shares in the next two years.
"It is our responsibility as a large bank to rescue small banks instead of letting them go. "The MoU signed today centred on safe guarding not only shareholders but also depositors ... to restore community bank trust," Dr Kimei said.
He said since the BoT asked them to rescue the community from the verge of collapsing "we have managed to turn around the bank."
He said TaCoBa deposits have increased in the last two years despite having a low capital to the current 4.0bn/-.
TaCoBa Chairman, Mr Rajabu Mmunda, said the agreement would enable the bank to operate with required capital of 2.0bn/- as required by the central bank.
"This MoU was made possible by cooperation not only between CRDB Bank and us but also the regulator and the government.
The chair said in last cashew nut season they handled 20bn/- transactions compared to 500m/- of previous season.
TaCoBa Managing Director Mugwagi Steven said the capital injection lifted the bank from losing its licence as it now has enough capital.
He said the bank last year made a pre-tax profit of 52m/- and is projecting to double the amount this year.