The licence of the City Co-operative Bank Limited, Mumbai, Maharashtra has been revoked by the Reserve Bank of India (RBI). This action was taken by the RBI due to the bank's inability to fulfill the necessary financial requirements specified in the Banking Regulation Act, 1949. The bank was found to have insufficient capital and unsustainable earning prospects, which are crucial factors in adhering to regulatory standards designed to protect the interests of depositors.
As per the directive of the Reserve Bank of India (RBI), the Commissioner for Cooperation and Registrar of Cooperative Societies, Maharashtra, has been directed to commence the procedure of liquidating the bank. This involves the selection of a liquidator who will supervise the systematic dissolution of the institution. Starting from the end of business on June 19, 2024, the bank is strictly forbidden from engaging in any banking activities, which includes accepting and repaying deposits.
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The RBI's determination was influenced by various factors crucial for the proper operation of banking institutions. Initially, the bank did not comply with the regulatory requirements outlined in Sections 11(1), 22(3)(a)-(e), and Section 56 of the Banking Regulation Act, 1949. This failure to adhere to regulations, along with the bank's unfavorable financial status, presented substantial risks to the welfare of its depositors and the general public.
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.
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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 grants the RBI the authority to enforce regulatory measures against banks that do not adhere to the legal requirements specified in the Act.
According to the DICGC Act, 1961, depositors of the bank are guaranteed protection up to a maximum limit of ₹5,00,000/- per depositor. The bank's most recent data indicates that around 87% of depositors are eligible to receive the full amount of their deposits from the Deposit Insurance and Credit Guarantee Corporation (DICGC). It is worth noting that as of June 14, 2024, DICGC has already paid out ₹230.99 crore to qualified depositors based on the claims submitted.
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