The Reserve Bank of India (RBI) has canceled the license of the People’s Co-operative Bank Ltd in Uttar Pradesh, the banking regulator said in a press release on March 21. RBI said that the bank will stop doing banking business with effect from the close of business on March 21, 2022.
“The Commissioner of Co-operatives and Registrar of Co-operative Societies, Uttar Pradesh are also requested to issue an order to close the bank and appoint a liquidator for the bank,” RBI said.
RBI said that the license was canceled because the bank did not have sufficient capital and earning potential.
Cancellation of license will affect public interest- RBI
Announcing the decision, the RBI said that with its current financial position, the bank would be unable to make full payments to its existing depositors and public interest would be adversely affected if the bank is allowed to carry on with its banking business. .
The regulator said that due to the cancellation of its licence, the People’s Co-operative Bank has been barred from carrying on the business of ‘banking’, which includes acceptance of deposits and repayment of deposits.
On liquidation, each depositor can take a deposit insurance claim amount up to Rs 5 lakh from the Deposit Insurance and Credit Guarantee Corporation (DICGC), the regulator said.
The regulator said that as per the data furnished by the bank, more than 99 per cent of the depositors are entitled to receive the full amount of their deposits from the DICGC.
RBI has canceled licenses of three cooperative banks this year
RBI said that till February 14, 2022, DICGC has sanctioned Rs 6.97 crore out of the total insured deposits under the provisions of Section 18A of the DICGC Act, 1961 on the basis of wills received from the concerned depositors of the bank.
This is the latest example of RBI’s action on weak cooperative banks this year. So far this year, the Reserve Bank of India (RBI) has canceled the licenses of three cooperative banks. These are Sarjeroda Naik Shirala Sahakari Bank, Independence Co-Operative Bank and Mantha Urban Co-operative Bank. All three banks are from the state of Maharashtra.
According to RBI, in all three cases, 99 per cent of the depositors will get their money back from the DICGC. In recent years, RBI’s dominance over co-operative banks has also emerged as a worrying factor for depositors.
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