RBI cancels licence of United India Co-operative Bank; orders winding up of lender

The Reserve Bank of India (RBI) cancelled the licence of United India Co-operative Bank in Uttar Pradesh. The bank ceased to carry on its banking business with effect from the close of business on July 19. The RBI order was issued on July 14.

The central bank requested the UP Commissioner and Registrar of Cooperative to issue an order for winding up of the bank and appoint a liquidator.

United India Co-operative Bank’s licence was cancelled by the RBI as the lender did not have adequate capital and earning prospects. “As such, 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,” it stated, further adding that 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) with Section 56 of the Banking Regulation Act, 1949.

The apex bank also stated that the continuance of the bank would be prejudicial to the interests of the depositors. The bank and its present financial position would be unable to pay its present depositors in full, it said.

“Public interest would be adversely affected if the bank is allowed to carry on its banking business any further,” said the RBI, leading it to cancel the licence of United India Co-operative Bank, which has been prohibited from conducting the business of banking.

Subsequently, the bank, among other things, would not be allowed to accept deposits and repayment of deposits as defined in Section 5(b) read with Section 56 of the Banking Regulation Act, 1949.

On liquidation, every depositor would be entitled to receive a deposit insurance claim amount of his or her deposits up to a ceiling of Rs 5 lakh, subject to the Deposit Insurance and Credit Guarantee Corporation (DICGC) Act.

RBI stated that as per data from the bank 99.98 per cent of the depositors are entitled the receive the full amount of their deposits from DICGC.

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