The Reserve Bank of India (RBI) has made a significant move by cancelling the licence of United India Co-operative Bank in Uttar Pradesh. The decision was taken due to the bank’s inadequate capital and earning prospects, as stated by the central bank in a recent note. Consequently, the bank ceased its banking operations on July 19, following the RBI’s order issued on July 14.
In response to the licence cancellation, the RBI has requested the Uttar Pradesh Commissioner and Registrar of Cooperative Societies to issue an order for winding up the bank and appoint a liquidator to oversee the process.
The RBI justified its action by pointing out that the United India Co-operative Bank failed to comply with the provisions of the Banking Regulation Act, 1949. The bank did not meet the requirements specified in Section 11(1) and Section 22(3)(d) read with Section 56 of the Act. Additionally, it was found to be in violation of Sections 22(3)(a), 22(3)(b), 22(3)(c), 22(3)(d), and 22(3)(e) of the same Act, which further led to the cancellation of its licence.
Furthermore, the RBI expressed concern about the interests of the depositors, stating that the continuance of the bank could be detrimental to them. The bank’s current financial position indicated that it would be unable to fully repay its depositors. In light of this, the RBI deemed it necessary to cancel the licence of United India Co-operative Bank, effectively prohibiting it from conducting any further banking business.
As a consequence of the licence cancellation, the bank will not be allowed to accept deposits or repay deposits, as defined in Section 5(b) read with Section 56 of the Banking Regulation Act, 1949.
Upon liquidation, each depositor will be entitled to receive a deposit insurance claim amount of their deposits, with a maximum limit of Rs 5 lakh, in accordance with the provisions of the Deposit Insurance and Credit Guarantee Corporation (DICGC) Act.
The RBI revealed that based on data from the bank, nearly 99.98% of the depositors are entitled to receive the full amount of their deposits from DICGC. This move aims to safeguard the interests of the majority of depositors and mitigate any potential financial losses they might have faced otherwise.
As the winding-up process commences and the liquidator takes charge, the RBI will closely monitor the situation to ensure a smooth and transparent resolution for the depositors and stakeholders of United India Co-operative Bank.
