On Thursday, the RBI had stated that they have cancelled the license of the United Co-operative Bank Ltd, in West Bengal because the bank does not have sufficient capital and earning prospects.
In West Bengal, the Registrar of Cooperative Societies had also been asked to issue the order for winding up the bank and to appoint a liquidator for the bank.
The RBI had stated in their recent statement that “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.”
Reasons why the RBI had to cancel the license of the bank:
- The bank did not have the required capital and earning prospects to run its business. And, it does not comply with the provisions of section 11(1) and section 22 (3) (d) read with section 56 of the Banking Regulation Act, 1949.
- The bank had not complied with the requirements of section (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.
- Allowing the bank to continue is against the interest of their depositors.
- Because of their current financial position they are unable to pay their current depositors in full amounts.
- The interest of the public would be diversely affected if the bank is continued to carry on its business any further.
The bank is forbidden from conducting the ‘banking’ business
The central bank had also mentioned that as one of the consequences of the cancellation of their license the United Co-operative Bank, Bagnan, West Bengal is forbidden from conducting the banking business, which includes acceptance of deposits and repayment of deposits as defined in Section 5 (b) read with Section 56 of the Banking Regulation Act, 1949 with immediate effect.
Adding on to the cancellation of the license and the beginning of the liquidation processes, the United Co-operative bank, Bagnan, WestBangal as per the DICGC Act, 1961 has to start the process of paying the depositors were added.
Keeping in mind the data that the bank has submitted, all of its depositors will be receiving the full amount of their deposits from the DICGC.
In the liquidation process, each and every depositor would be receiving the insurance claim amount in respect of their deposits of up to a monetary ceiling of ₹5,00,000/- (Rupees Five lakh only) from the DICGC subject to the provisions of the DICGC Act, 1961.