Reserve Bank of India (RBI) has cancelled the licence of the 105-year-old CKP Co-operative Bank with effect from April 30 and has told registrar of cooperative societies to initiate winding up proceedings and appoint a liquidator for it.
The central bank order came after years of effort to get the bank back on rails through the recovery of bad loans. On liquidation, every depositor will be entitled to repayment of deposits up to Rs 5 lakh from Deposit Insurance and Credit Guarantee Corporation (DICGC). This is the first time RBI is triggering the higher deposit insurance limit, which came into effect after the Budget in February 2020.
The bank’s website said its deposits stood at Rs 485 crore as on November 2019, while loans outstanding were Rs 161 crore. It had a negative net worth of Rs 239 crore due to defaults. It had eight branches across Mumbai and Thane and was placed under RBI directions in 2012..
“The bank’s financial position is highly adverse and unsustainable. There is no concrete revival plan or proposal for a merger with another bank. Credible commitment towards revival from the management is not visible,” RBI said. “Hundreds of depositors and shareholders want the bank to be revived. I have been approached by many of them, and we want more time, as the bank can be revived. We plan to approach the authorities, including RBI,” said Vishwash Utagi who is coordinating efforts to rescue the bank.
“The bank cannot pay present and future depositors, thereby not complying with the law,” RBI said. RBI officials said the bank could not be allowed to restart as it did not have minimum required capital adequacy and reserves, and there was no earning potential.
An RBI spokesperson said the bank’s affairs were being conducted in a manner detrimental to public interest and interest of depositors, and the general character of bank management was prejudicial to the interest of depositors and public interest.
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