On Thursday, the country's apex bank RBI suspended the license of West Bengal's United Co-operative Bank Ltd. The decision to this effect has been taken as the bank does not have sufficient capital as well as earning prospects to continue banking operations.
For the winding up of the bank, the request has been made to the Registrar of Cooperative Societies to issue an order for the same and also appoint a liquidator.
In a statement, the RBI said, "Consequently, the bank ceases to carry on banking business, with effect from the close of business on May 13, 2021. The Registrar of Cooperative Societies, West Bengal has also been requested to issue an order for winding up the bank and appoint a liquidator for the bank.
Why the RBI cancelled the license of the United Co-operative Bank?
As the bank is left with no substantial capital base nor there are indications of earnings in the future course, the RBI has taken the decision to wind up the bank. Furthermore, it does not complies with the provisions of section 11(1) and section 22 (3) (d) read with section 56 of the Banking Regulation Act, 1949.
Also it did not adhere to the requirements of section 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.
Bank's continuation is deemed to be detrimental to the interest of the depositors. Also, given its current financial standing, the bank will be unable to pay its current depositors in full.
What Will Happen To Depositors of United Co-operative Bank?
As per the submissions by the United Co-operative Bank, all of the depositors of the bank will be paid off the full amount of their deposits from Deposit Insurance and Credit Guarantee Corporation (DICGC). In accordance with the provisions of the DICGC Act, 1961, each of the depositor shall be entitled to get deposit insurance claim amount against his or her deposits up to a maximum amount of Rs. 5 lakh from the DICGC.