The Reserve Bank of India has cancelled the license of Lucknow Urban Cooperative Bank on Friday. As per the data submitted by the bank, 99.53% of the depositors are entitled to receive the full amount of their deposits from DICGC, reads a press release from the RBI.
It further reads, the bank ceases to carry on banking business, with effect from the close of business on September 29, 2023. The Commissioner and Registrar of Cooperative, Uttar Pradesh have also been requested to issue an order for winding up the bank and appoint a liquidator for the bank.
The Reserve Bank cancelled the licence of the bank because the bank does not have adequate capital and earning prospects. As such, it does not comply with the provisions of Section 11(1) and Section 22 (3) (d) read with Section 56 of the Banking Regulation Act, 1949.
Besides, the bank has failed to comply with the requirements of Sections 22(3) (a), 22 (3) (b), 22(3)(c), 22(3) (d) and 22(3)(e) read with Section 56 of the Banking Regulation Act, 1949.
“The continuance of the bank is prejudicial to the interests of its depositors. The bank with its present financial position would be unable to pay its present depositors in full; and Public interest would be adversely affected if the bank is allowed to carry on its banking business any further”, the RBI press release reads.
Consequent to the cancellation of its licence, Lucknow Urban Co-operative Bank Ltd., Lucknow, Uttar Pradesh is prohibited from conducting the business of ‘banking’ which includes, among other things, acceptance of deposits and repayment of deposits as defined in Section 5(b) read with Section 56 of the Banking Regulation Act, 1949 with immediate effect.
On liquidation, every depositor would be entitled to receive deposit insurance claim amount of his/her deposits up to a monetary ceiling of Rs 5,00,000/- (Rupees five lakh only) from Deposit Insurance and Credit Guarantee Corporation (DICGC) subject to the provisions of DICGC Act, 1961.
In September 2023, six urban cooperative banks lost their banking license. They include, Ananthasayanam Co-operative Bank Ltd., Trivandrum, Sri Mallikarjuna Pattana Sahakari Bank Niyamita, Maski, Karnataka, National Urban Co-operative Bank Limited, Bahraich (U.P), Kapol Co-operative Bank Limited, Mumbai, Maharashtra, Nashik Zilla Girna Sahakari Bank Limited, Nashik, Maharashtra and Lucknow Urban Co-operative Bank Ltd., Lucknow, Uttar Pradesh.
Co-operative banks have become licensed looting centres
What happens to the bank employees in such cases? Do they get a lumpsum for their left over job tenure or they get job at another urban cooperative or another department?