RBI cancels Adoor Co-operative Urban Bank’s banking licence, allows it to operate as non-banking institution

The Reserve Bank of India (RBI) has said that it has cancelled the banking licence of Kerala-based Adoor Co-operative Urban Bank and has allowed it to function as a non-banking institution. The cancellation of licence is with effect from the close of business on April 24, 2023, according to a notification issued by the RBI. 

The central bank said that it has cancelled the banking licence dated January 3, 1987, granted to The Adoor Co-operative Urban Bank Ltd, Adoor, Kerala to carry on banking business in India under Section 22 read with Section 56 of the Banking Regulation Act, 1949, with effect from the close of business on April 24, 2023. “This makes it obligatory on the part of The Adoor Co-operative Urban Bank Ltd, Adoor, to stop conducting the business of ‘banking’ within the meaning of section 5(b) of the Act ibid, including acceptance of deposits from non-members with immediate effect,” the RBI added. 

According to RBI, the difference between a bank and NBFC is that a bank is a government-authorised entity that provides banking services to the people, whereas NBFC is a company providing banking services to the people without holding a bank licence. 

On Monday, RBI said it has imposed penalties on four cooperative banks — Bombay Mercantile Co-operative Bank, Tamil Nadu State Apex Co-operative Bank,  Janata Sahakari Bank and Baran Nagrik Sahkari Bank — for contravention of various norms. 

A Rs 16 lakh penalty was imposed on Chennai-based The Tamil Nadu State Apex Co-operative Bank for contravention of various norms, whereas a penalty of Rs 13 lakh has been imposed on Bombay Mercantile Co-operative Bank as it failed to transfer eligible amount to Depositor Education and Awareness Fund (DEAF) within the prescribed period and transferred the same with delay, RBI said in a release. 

The central bank, in a separate notification, said a penalty of Rs 13 crore has been imposed on Janata Sahakari Bank, Pune for non-compliance with directions on 'Interest Rate on Deposits'. 

According to a report, the central bank penalised over 180 banks in 2022 for breaching various regulatory norms. This is the largest number of penalties issued by the central bank in a year since it got supervisory powers over erring cooperative banks two years ago. In 2020, the RBI penalised 22 cooperative banks and it jumped to 124 banks in 2021.  

The Centre amended the Banking Regulation Act (as applicable to cooperative societies) in 2021 to give the central bank added supervisory powers.  

The penalties issued in 2022 were for violations such as not maintaining a mandatory cash reserve ratio (CRR) buffer, not having robust IT infrastructure to detect suspicious transactions, not complying with regulations on bill discounting, etc. 

(With agency inputs)

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