In a significant move, the Reserve Bank of India has announced the cancellation of the banking license for Purvanchal Co-operative Bank Ltd., located in Ghazipur, Uttar Pradesh. The order, issued on June 14, 2024, will take effect from the close of business on June 15, 2024, leading to the cessation of all banking activities by the institution.
The central bank’s decision comes after a thorough examination of the bank’s financials, which revealed inadequacies in capital and earning prospects. According to the RBI, Purvanchal Co-operative Bank failed to meet the regulatory requirements stipulated under Sections 11(1), 22(3)(a-e), and 56 of the Banking Regulation Act, 1949, which are critical for continuous and safe banking operations.
The RBI highlighted that the bank’s continued operation could potentially harm the interests of its depositors and the public at large. With its current financial state, the bank would be unable to fully repay its depositors, justifying the need for immediate license revocation.
Following the RBI’s license cancellation, the Commissioner for Cooperation and Registrar of Cooperative Societies, Uttar Pradesh, has been directed to initiate the bank’s winding up and appoint a liquidator.
This development directly impacts the bank’s ability to conduct any banking operations, particularly the acceptance and repayment of deposits as per the definition under Section 5(b) of the Banking Regulation Act.
In terms of depositor compensation, the Deposit Insurance and Credit Guarantee Corporation (DICGC) plays a crucial role. Under the DICGC Act of 1961, each depositor at the Purvanchal Co-operative Bank is insured up to a limit of ?5,00,000.
As per the latest data prior to the license revocation, about 99.51% of the bank’s depositors will receive the full amount of their deposits under this insurance scheme. Furthermore, as of May 30, 2024, the DICGC has disbursed ?12.63 crore in settlement of the insured deposits, following confirmation of depositor eligibility.
The decision underscores the RBI’s commitment to maintaining the stability and integrity of the financial system, prioritizing depositor interests and public trust in the banking sector.
