The Reserve Bank of India has cancelled the licence of Bhagyodaya Friends Urban Co-operative Bank Limited, Warud, based in Amravati, Maharashtra. “Consequently, the bank ceases to carry on banking business, with effect from the close of business on April 22, 2021”, reads a RBI release.
The Commissioner for Cooperation and Registrar of Cooperative Societies, Maharashtra has been requested to issue an order for winding up the bank and appoint a liquidator for the bank. The Reserve Bank cancelled the licence of the bank because it did not have adequate capital and earning prospects.
RBI says the continuance of the bank is prejudicial to the interests of its depositors as the UCB with its present financial position would be unable to pay its present depositors in full; and Public interest would be adversely affected if the bank is allowed to carry on its banking business any further.
“Consequent to the cancellation of its licence, Bhagyodaya Friends Urban Co-operative Bank is 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”, says RBI.
However, with the cancellation of licence and commencement of liquidation proceedings, the process of paying the depositors as per the DICGC Act, 1961 will be set in motion. As per the data submitted by the bank, more than 98% of the depositors will receive full amounts of their deposits from Deposit Insurance and Credit Guarantee Corporation (DICGC).
On liquidation, every depositor would be entitled to receive deposit insurance claim amount of his/her deposits up to a monetary ceiling of Rs five lakh from the DICGC subject to the provisions of the DICGC Act, 1961.
