RBI Suddenly Shuts Down This Cooperative Bank; Customers Can Only Get Rs 5 Lakh Deposit Back

The RBI has cancelled the licence of Independence Co-operative Bank Ltd in Maharashtra’s Nashik.

It said that the bank will no longer carry on its banking business with effect from its closure on February 03, 2022.

The Commissioner for Cooperation and Registrar of Cooperative Societies, Maharashtra has been asked to issue an order to close the bank and appoint a liquidator for it.

Why?

The licence has been cancelled due to a variety of reasons.

• Insufficient Capital

The bank does not have enough capital and earning prospects.

Therefore it cannot comply with the provisions of Section 11(1) and Section 22 (3) (d) read with Section 56 of the Banking Regulation Act, 1949.

• Non-Compliance

The bank has failed to comply with the requirements of Sections 22(3) (a), 22 (3) (b), 22(3)(c), 22(3) (d) and 22(3)(e) read with Section 56 of the Banking Regulation Act, 1949.

• Against Public Interest

Allowing the bank to continue operations is prejudicial to the interests of its depositors.

It would not be able to pay its present depositors in full given its present financial position.

Hence, the public would be adversely affected if the bank carries on with its business any further.

What It Means For The Customers

Now that its licence has been cancelled, the bank will not be allowed to conduct banking activities such as acceptance of deposits and repayment of deposits.

Upon liquidation the bank’s depositors are entitled to receive deposit insurance claim amount of their deposits up to a monetary ceiling of Rs 5,00,000.

What Happens When Banks Fail

Small finance banks are directly regulated by the RBI, same as other big banks. 

So if they fail, the depositor can turn to the insurance cover offered by the DICGC as per its deposit insurance plan.

DICGC or Deposit Insurance and Credit Guarantee Corporation is a specialised division of the RBI.

Insurance Cover

Depositors are insured up to a maximum of Rs 5 lakh for both principal and interest amounts they hold.

This cover was raised to Rs 5 lakh from Rs 1 lakh, effective from February 4, 2020.

The plan covers deposits such as savings accounts, fixed deposits (FD), current accounts, recurring deposits (RD), etc.

Disbursement

Nearly 100% of the depositors of the bank are entitled to the full amount of their deposits from DICGC.

As on January 27, 2022, DICGC has disbursed Rs 2.36 crore of the total insured deposits based on the willingness received from the concerned depositors of the bank.