The Reserve Bank of India delivered the order cancelling the licence of Urban Co-op Bank (Bhubaneswar) on February 17, 2014. The Registrar of Co-operative Societies, Government of Odisha has also been requested to issue an order for winding up the bank and appoint a liquidator for the bank.
On liquidation, every depositor is entitled to repayment of his/her deposits up to a monetary ceiling of Rupees one lakh from the Deposit Insurance and Credit Guarantee Corporation under usual terms and conditions.
The Urban Co-operative Bank Ltd., Bhubaneswar was granted a licence by the Reserve Bank of India on September 7, 1987 to conduct banking business.
The statutory inspection conducted with reference to its financial position as on March 31, 2003 had reported deteriorating financial position The bank had sanctioned loans to its Directors and their relatives in 14 accounts and with the exception of one account, all accounts became NPA.
In view of the above, directions were imposed on the bank. Again modified directions were issued to the bank in March 14, 2006 restricting acceptance of fresh deposits in savings and current accounts or any other accounts. Directions were again modified on a review of liquidity position of the bank in 2007.
Keeping in view the deteriorating financial position and continuing irregularities as on March 31, 2008, a Show Cause Notice (SCN) for cancellation of licence was issued to the bank on December 11, 2008. The reply of the bank dated January 13, 2009 to the SCN was not found satisfactory.
The bank’s revival plan submitted on January 15, 2009 was also not found satisfactory. The bank was given time to explore the possibility of a merger with any other strong UCB in or outside the State of Odisha. However, the bank failed to come forward with any viable merger proposal.
A fresh SCN for cancellation of licence was issued to the bank on September 6, 2011 after reviewing its financial position as on March 31, 2011. The bank had not submitted its reply to the SCN and sought extension of time to materialize its merger proposal.
From the facts and circumstances stated above it was observed that the bank is not in a position to pay its present and future depositors and the affairs of the bank are being conducted in a manner detrimental to the interest of the present and future depositors. The financial position of the bank leaves no scope for its revival.
In view of the above, the licence granted to the bank to conduct banking business deserved to be cancelled. Accordingly, the licence dated September 7, 1987 granted to The Urban Co-operative Bank Ltd., Bhubaneswar, Odisha to conduct banking business in India under Section 22 of the Act has been cancelled.