RBI cancels licence of Pune-based Rupee Cooperative Bank

The Reserve Bank of India (RBI) headquarters in Mumbai, India.

The Reserve Bank of India (RBI) on August 10 said it has cancelled Pune-based Rupee Cooperative Bank’s licence as the lender did not have adequate capital and earning prospects.
“The continuance of the bank is prejudicial to the interests of its depositors,” the RBI said in a release.

With its current financial position, the bank would be unable to pay its present depositors in full, the regulator said. Public interest would be adversely affected if the bank is allowed to carry on its banking business any further, the regulator added.

The RBI’s order shall come into effect after six weeks from today. Consequently, the bank will cease to carry on banking business, with effect from September 22.

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.

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 lakh from the Deposit Insurance and Credit Guarantee Corporation (DICGC).

As per the data submitted by the bank, more than 99 percent of the depositors are entitled to receive the full amount of their deposits from DICGC, said the RBI.

Troubles had been brewing at the Pune-based lender for quite some time. In February 2013, the RBI had placed Rupee Cooperative Bank under restrictions. The validity of the directions was extended from time to time.

The RBI has been tightening its scrutiny of cooperative banks over the last few years. More recently, it has begun penalising cooperative banks for violating rules so that any irregularity can be clamped down at an early stage, without much torment to depositors. In India, cooperative banks are regulated by the RBI and the respective state governments.

The issue of depositors’ money being stuck in failed or tainted cooperative banks is not new. A total of 27 small cooperative banks were liquidated in the past five years, while 42 cooperative banks were closed on account of mergers during this period, minister of state for finance Bhagwat Karad informed Parliament on July 26. During FY22, a total of 11 cooperative banks were shut on account of mergers as against none in the year before that.

Moneycontrol has done a series on ‘India’s cooperative mess' that highlights the plight of retail depositors whose hard-earned savings are stuck at failed cooperative banks across the country.

You can read those stories  here,  here and here .