RBI cancels licence of Madgaum Urban Co-operative Bank

NT NETWORK

Panaji

Struggling under the RBI restrictions since May 2019, operations of the Margao-based Madgaum Urban Co-operative Bank Ltd came to a permanent halt on Thursday with the RBI cancelling the licence of the bank and issuing the order for cessation of

business.  

Consequent upon the cancellation of its licence, Madgaum Urban Co-operative Bank has been prohibited from conducting the business of banking 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.

The cancellation of the licence is effective from the close of business on July 29, 2021.

The RBI has asked the office of the state registrar of cooperative societies to issue an order for winding up the bank and appoint a liquidator. 

With the cancellation of the licence and the commencement of liquidation proceedings the process of paying the depositors as per the DICGC Act, 1961 will be set in motion, the RBI said. 

As per the data submitted, about 99 per cent of the depositors will receive full amount of their deposits from the Deposit Insurance and Credit Guarantee Corporation. 

“On 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 the DICGC subject to the provisions of the DICGC Act, 1961,” the RBI explained.  

“The bank does 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. The bank has failed to comply with the requirements of Section 22(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,”  said the RBI notification cancelling the MUCL licence.

It said that continuance of the bank is prejudicial to the interests of its depositors and “the bank with its present financial position would be unable to pay its present depositors in full”. 

Public interest “would be adversely affected if the bank is allowed to carry on its banking business any further”.

The MUCL first came under the RBI restrictions on May 2, 2019 for an initial period of six months with the restraining order being extended from time to time.

The restrictions were still in force till August 2, 2021.

To come out of the RBI restrictions and commence operations the directors of the urban cooperative bank had proposed merger with a healthy cooperative bank. But the merger plans did not succeed.

This is the second cooperative bank in the state that has its licence cancelled by the RBI.

Previously the licence of Mapusa Urban Cooperative Bank was cancelled in April 16 2020, with accountholders of the bank still to receive

their deposits.

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