Just at the close of the year 2023, the Reserve Bank of India had to cancel the licences of two of the urban cooperative banks namely, the Nashik based The Faiz Mercantile Cooperative Bank and Tamil Nadu based Musiri Urban Co-operative Bank.
The UCB sector had to lose two of the banking licences which are so hard to come by. These two UCBs take the number of total licences lost by the sector to 57 from 55, as reported earlier in these columns quoting Union Minister of State for Finance Bhagwat Karad.
The RBI cancelled the licence of the Faiz Mercantile Cooperative Bank Ltd., Nashik, Maharashtra as a result of which the bank ceased to carry on banking business, with effect from the close of business on December 30, 2023.
The Commissioner for Cooperation and Registrar of Cooperative Societies, Maharashtra has 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 as the bank does not have adequate capital and earning prospects. The bank also failed to comply with the requirements of several Sections of the Banking Regulation Act, 1949.
In a press release the RBI says “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.”
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/ from Deposit Insurance and Credit Guarantee Corporation. As per the data submitted by the bank, 99.87% of the depositors are entitled to receive the full amount of their deposits from DICGC.
As on October 30, 2023, DICGC has already paid Rs 7.07 crore of the total insured deposits under the provisions of Section 18A of the DICGC Act, 1961 based on the willingness received from the concerned depositors of the bank.
Musiri Urban Co-operative Bank lost its licence through an order of the RBI dated December 29, 2023. The bank ceases to carry on banking business, with effect from the close of business on December 29, 2023. The Registrar of Cooperative Societies, Tamil Nadu has 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 as the bank does not have adequate capital and earning prospects.
The RBI says the continuance of the bank is prejudicial to the interests of its depositors as 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.
As per the data submitted by the bank, 98.67% of the depositors are entitled to receive the full amount of their deposits from DICGC. As on September 30, 2023 DICGC has already paid Rs 134.42 lakh of the total insured deposits under the provisions of Section 18A of the DICGC Act, 1961 based on the willingness received from the concerned depositors of the bank.
