RBI cancels licence of Deccan Urban Co-operative Bank: What will happen to depositors?

The Reserve Bank of India (RBI) on Thursday cancelled the licence of Deccan Urban Co-operative Bank Ltd, Vijayapur, Karnataka due to inadequate capital and no earning prospects.

“Consequent to the cancellation of its licence, “Ltd., Vijayapur, Karnataka” is prohibited from conducting the business of ‘banking’ which includes, among other things, 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,” RBI said in a statement.Deccan Urban Co-operative Bank

Consequently, the bank has ceased to carry on banking business, with effect from the close of business on August 18, RBI added.

The banking regulator also said that it has requested the Commissioner for Cooperation and Registrar of Cooperative Societies, Karnataka to issue an order for winding up the bank and appoint a liquidator.

RBI in its statement said that the continuance of the bank is prejudicial to the interests of its depositors and that the bank with its present financial position would be unable to pay its present depositors in full. It added that public interest would be adversely affected if the bank is allowed to carry on its banking business any further.

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What happens to the depositors?
 
The central bank has said that upon liquidation, every depositor would be entitled to receive deposit insurance claim amount of his/her deposits up to a monetary ceiling of Rs 5 lakh from Deposit Insurance and Credit Guarantee Corporation (DICGC) subject to the provisions of DICGC Act, 1961.

Data submitted by the bank suggests that over 99% of the depositors are entitled to receive the full amount of their deposits from DICGC.

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