The Reserve Bank of India (RBI) terminated the licence of Pune-based Seva Vikas Co-operative Bank on Monday, and the bank would no longer conduct banking operations as of October 10. The RBI revoked the lender’s licence because the urban cooperative bank lacked appropriate capital and earning potential.
“The Commissioner for Cooperation and Registrar of Cooperative Societies, Maharashtra has also been requested to issue an order for winding up the bank and appoint a liquidator for the bank,” the central bank said in a statement.
Why did the RBI revoke the licence of Vikas Co-operative Bank?
The bank lacks sufficient capital and earning potential. As such, it violates Sections 11(1) and 22(3)(d) of the Banking Regulation Act of 1949, as well as Section 56 of the Act.
The bank failed to comply with the requirements of Sections 22(3)(a), 22(3)(b), 22(3)(c), 22(3)(d), and 22(3)(e) of the Banking Regulation Act of 1949, as read with Section 56.
The bank’s continued existence is detrimental to the depositors’ interests.
With its current financial situation, the bank would be unable to pay its current depositors in full; and – If the bank is permitted to continue operating as a bank, the public interest would suffer.
On liquidation, every depositor would be entitled to a deposit insurance claim sum of Rs 5,00,000 from the Deposit Insurance and Credit Guarantee Corporation (DICGC), subject to the requirements of the DICGC Act, 1961.
According to the bank’s records, about 99 percent of depositors are eligible to retrieve the full value of their deposits from DICGC. As of September 14, 2022, the DICGC has already paid Rs 152.36 crore of the total insured deposits under Section 18A of the DICGC Act, 1961, depending on the desire of the bank’s depositors.
Meanwhile, the RBI terminated the licence of Pune-based Rupee Cooperative Bank in August of this year. The RBI’s move is being challenged in the Bombay High Court.
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