The Reserve Bank of India (RBI) has cancelled the licenses of two urban cooperative banks, “Banaras Merchantile Co-operative Bank Limited” and “Shimsha Sahakara Bank Niyamitha, Maddur, Mandya District, Karnataka,” effective from the close of business on July 04 and July 05, 2024, respectively. This move follows the banks’ failure to comply with regulatory requirements.
The RBI’s decision to cancel the license of “Banaras Merchantile Co-operative Bank Limited” in Varanasi was based on the bank’s inadequate capital and earning prospects, making it non-compliant with several provisions of the Banking Regulation Act, 1949. The bank’s continuance was deemed prejudicial to the interests of its depositors, as it would be unable to pay its current depositors in full.
The Commissioner for Cooperation and Registrar of Cooperative Societies, Uttar Pradesh, has been requested to issue an order for the winding up of the bank and appoint a liquidator. Consequently, the bank is prohibited from conducting any banking business, including accepting and repaying deposits.
Upon liquidation, depositors are entitled to receive insurance claims up to Rs 5,00,000 from the Deposit Insurance and Credit Guarantee Corporation (DICGC). According to the bank’s data, 99.98% of the depositors are expected to receive the full amount of their deposits, with Rs 4.25 crore already paid by DICGC as of April 30, 2024.
Similarly, the RBI cancelled the license of “Shimsha Sahakara Bank Niyamitha” in Maddur, Mandya District, Karnataka, due to its lack of adequate capital and earning prospects, non-compliance with the Banking Regulation Act, and the risk posed to its depositors. The Registrar of Cooperative Societies, Karnataka, has been asked to issue a winding-up order and appoint a liquidator.
As with Banaras Merchantile, Shimsha Sahakara Bank is prohibited from conducting banking activities immediately. Depositors are entitled to receive up to Rs 5,00,000 from the DICGC, with 99.96% expected to receive the full amount. As of March 31, 2024, Rs 11.85 crore has already been disbursed by the DICGC.
The cancellations underscore the RBI’s commitment to protecting depositors’ interests and maintaining the stability of the banking system. Affected depositors will be able to claim their insured deposits, ensuring minimal financial disruption.
For further details, depositors can contact the DICGC or visit the official websites of the respective banks and the RBI.
