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RBI Revokes License Of City Co-operative Bank, Orders Immediate Winding Up
Rajesh Kumar
24 Jun 2024 8:15 AM GMT
The Reserve Bank of India (RBI) has cancelled the licence of the City Co-operative Bank Limited, Mumbai, Maharashtra. This decision, as communicated by the RBI, stem from the bank's failure to meet essential financial criteria outlined under the Banking Regulation Act, 1949. The bank was found deficient in adequate capital and sustainable earning prospects, essential components to...
The Reserve Bank of India (RBI) has cancelled the licence of the City Co-operative Bank Limited, Mumbai, Maharashtra. This decision, as communicated by the RBI, stem from the bank's failure to meet essential financial criteria outlined under the Banking Regulation Act, 1949. The bank was found deficient in adequate capital and sustainable earning prospects, essential components to ensure compliance with regulatory standards aimed at safeguarding depositor interests.
In accordance with the RBI's directive, the Commissioner for Cooperation and Registrar of Cooperative Societies, Maharashtra, was instructed to initiate the process of winding up the bank. This includes the appointment of a liquidator to oversee the orderly dissolution of the institution. Effective immediately from the close of business on June 19, 2024, the bank is prohibited from conducting banking operations, including the acceptance and repayment of deposits.
The decision of RBI came in response to multiple factors critical to the sound functioning of banking entities. Firstly, the bank failed to adhere to regulatory provisions of Sections 11(1), 22(3)(a)-(e), and Section 56 of the Banking Regulation Act, 1949. This non-compliance, coupled with the adverse financial position of the bank, posed significant risks to the interests of its depositors and the broader public interest.
Section 11(1) mandates that every banking company incorporated in India must maintain a minimum paid-up capital as determined by the RBI. This capital requirement is intended to provide a financial cushion that enables banks to absorb potential losses and maintain resilience against financial shocks.
Sections 22(3)(a)-(e) outline specific operational requirements that banks must meet. These include maintaining cash reserves, liquidity ratios, and compliance with investment norms. These provisions are designed to ensure that banks manage their resources prudently.
Section 56 of the Banking Regulation Act, 1949 empowers the RBI to take regulatory actions against banks that fail to comply with the statutory provisions outlined in the Act.
Under the provisions of the DICGC Act, 1961, depositors of the bank are assured of protection up to a monetary ceiling of ₹5,00,000/- per depositor. As per the latest data submitted by the bank, approximately 87% of depositors are entitled to receive the full amount of their deposits from the Deposit Insurance and Credit Guarantee Corporation (DICGC). Notably, as of June 14, 2024, DICGC has already disbursed ₹230.99 crore to eligible depositors based on claims received.
