RBI Revokes License of City Co-operative Bank, Orders Immediate Winding Up: Detailed Overview”
The Reserve Bank of India (RBI) has taken the unprecedented step of cancelling the license of City Co-operative Bank Limited, headquartered in Mumbai, Maharashtra. This decision, rooted in the Banking Regulation Act, 1949, was driven by the bank’s failure to meet crucial financial benchmarks essential for regulatory compliance. Specifically, the bank fell short in maintaining adequate capital reserves and sustainable earnings prospects, critical components necessary to safeguard the interests of depositors.
In response to the RBI’s directive, the Commissioner for Cooperation and Registrar of Cooperative Societies, Maharashtra, has been tasked with overseeing the process of winding up the bank. This involves appointing a liquidator to manage the orderly dissolution of the institution. Effective immediately from June 19, 2024, the bank is prohibited from conducting any banking operations, including accepting and repaying deposits.
The RBI’s decision was influenced by multiple factors pivotal to the operational integrity of banking entities. Firstly, the bank was found non-compliant with essential provisions outlined in Sections 11(1), 22(3)(a)-(e), and Section 56 of the Banking Regulation Act, 1949. These include requirements related to maintaining minimum paid-up capital, liquidity ratios, and adherence to investment norms, all designed to ensure prudent financial management and stability.
Section 11(1) mandates that every banking company incorporated in India must maintain a specified minimum paid-up capital as prescribed by the RBI, which acts as a financial buffer against potential losses. Sections 22(3)(a)-(e) further detail operational standards that banks must adhere to, including the maintenance of cash reserves and liquidity requirements, crucial for managing day-to-day operations and financial stability.
Moreover, Section 56 of the Banking Regulation Act empowers the RBI to take regulatory actions against banks failing to comply with statutory provisions, underscoring the regulatory authority’s commitment to upholding banking sector integrity and protecting depositor interests.
Under the Deposit Insurance and Credit Guarantee Corporation (DICGC) Act, 1961, depositors of City Co-operative Bank are assured protection up to ₹5,00,000 per depositor. As per recent data, approximately 87% of depositors are set to receive full compensation from DICGC, with disbursements totaling ₹230.99 crore already processed as of June 14, 2024, demonstrating swift action to safeguard depositor funds amidst the bank’s closure.
For further details, you can access the RBI’s official order and decision regarding City Co-operative Bank’s license revocation here.
