RBI cancels license of UP-based Urban Co-operative Bank

RBI

The Reserve Bank of India (RBI) has cancelled the licence of Uttar Pradesh-based Urban Co-operative Bank Limited, citing inadequate capital and non-compliance with certain norms.

Consequently, the bank will cease to carry on banking business with effect from the close of business on December 7, 2023, the RBI said in a press release on 7 December.

Subsequently, the commissioner and registrar of cooperative, Uttar Pradesh has been requested to issue an order for winding up the bank and appoint a liquidator for the bank, the RBI said.

The RBI said the action is due to inadequate capital and earning prospects and said 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 said.

Consequent to the cancellation of its licence, Urban Co-operative Bank is prohibited from conducting the business, including acceptance of fresh deposits.

On liquidation, every depositor would be entitled to receive deposit insurance claim amount of his/her deposits up to a monetary ceiling of Rupees five lakh from Deposit Insurance and Credit Guarantee Corporation (DICGC) subject to the provisions of DICGC Act, 1961, the RBI said.

As per the data submitted by the bank, 98.32 percent of the depositors are entitled to receive full amount of their deposits from DICGC, the RBI said.

This is the second cooperative bank losing the working permit in the last fortnight. On December 4, the RBI had cancelled the licence of Kolhapur-based Shankarrao Pujari Nutan Nagari Sahakari Bank Limited because of inadequate capital.

The lender ceases to carry out banking business from the close of business hour on December 4, the RBI said in a release. The Commissioner for Cooperation and Registrar Cooperative Societies, Maharashtra, has also been requested to issue an order for winding up the bank and appoint a liquidator for it, the RBI said.

Last month, on November 24, the RBI had superseded the board of Mumbai-based Abhyudaya Cooperative Bank citing material concerns related to poor corporate governance standards, the regulator said in a statement on November 24.

The RBI action is valid for a period of 12 months, the central bank said. Subsequently, the RBI has appointed Satya Prakash Pathak, former Chief General Manager of State Bank of India as administrator to manage the affairs of the bank during this period.

In recent years, the RBI has been cracking down on erring cooperative banks. In September 2019, the RBI had superseded the board of PMC Bank and placed it under various regulatory restrictions after detection of certain financial irregularities, hiding and misreporting of loans given to real estate developer HDIL.

In the last two years , the RBI has cancelled licenses of around 10 cooperative banks. These include Mudhol Cooperative Bank, Millath Cooperative Bank, Shri Anand Cooperative Bank, Rupee Cooperative Bank, Deccan Urban Cooperative Bank, Laxmi Cooperative Bank, Seva Vikas Cooperative Bank and Babaji Date Mahila Urban Bank.