The Reserve Bank of India (RBI) has taken a decisive step by cancelling the license of Urban Co-operative Bank Limited based in Uttar Pradesh.
The action, effective from December 7, 2023, stems from concerns over inadequate capital and non-compliance with regulatory norms.
The RBI, in a press release on December 7, highlighted that the bank’s current financial state jeopardizes the interests of its depositors. Consequently, the commissioner and registrar of cooperative in Uttar Pradesh have been urged to initiate the winding-up process and appoint a liquidator for the bank.
The central bank emphasized that the continuation of the bank’s operations would adversely affect public interest, and the institution would be unable to meet its current deposit obligations in full.
As a result of the license cancellation, Urban Co-operative Bank is barred from conducting any banking activities, including accepting new deposits. In the event of liquidation, depositors are assured of receiving the deposit insurance claim amount, up to a maximum of Rs. 5 lakh, from the Deposit Insurance and Credit Guarantee Corporation (DICGC), as per the DICGC Act, 1961.
Data submitted by the bank indicates that a substantial majority, 98.32 percent, of depositors are eligible to receive the full amount of their deposits from DICGC.
This development follows a recent trend, with another cooperative bank, Shankarrao Pujari Nutan Nagari Sahakari Bank Limited in Kolhapur, having its license revoked by the RBI on December 4 due to inadequate capital.
It’s noteworthy that the RBI has been actively addressing concerns in the cooperative banking sector, evident in the cancellation of licenses and the superseding of boards, as seen with the action taken against Mumbai-based Abhyudaya Cooperative Bank in November.
The regulatory measures are aimed at ensuring sound governance standards in these financial institutions.