The Reserve Bank of India has cancelled the licence of Mahatma Fule Urban Co-operative Bank based in Patoda in the district of Beed in Maharashtra.
The UCB had ceased to be solvent and the depositors were being inconvenienced by the continued uncertainty, reads a release of RBI.
Consequent to the cancellation of its licence, Mahatma Fule Urban Co-operative Bank Ltd., Patoda Dist. Beed (Maharashtra) is prohibited from carrying on business of ‘banking’ as defined in the Banking Regulation Act, 1949.
The Registrar of Co-operative Societies, Maharashtra State has also been requested to issue an order for winding up the bank and appoint a liquidator for the bank.
With the cancellation of licence and commencement of liquidation proceedings, the process of paying the depositors, the amount insured as per the Depositor Insurance and Credit Guarantee Corporation Act, 1961 will be set in motion subject to terms and conditions of the Deposit Insurance Scheme.
Upon liquidation, every depositor is entitled to repayment of his/her deposits up to a monetary ceiling of Rupees one lakh only from the Deposit Insurance and Credit Guarantee Corporation (DICGC) under usual terms and conditions.
For any clarifications, depositors may approach Shri Abhijit Majumdar, General Manager, Urban Banks Department, Reserve Bank of India, Nagpur. His contact details are: Postal Address: Urban Banks Department, Additional Office Building, East High Court Road, Nagpur–440 001; Telephone Number: (0172) 2806838; Fax Number: (0172) 2552896; Email.
The bank was granted a licence by the Reserve Bank of India on July 23, 1998 to commence banking business. The statutory inspection of the bank carried out with reference to its financial position as on March 31, 2010 revealed that it had not maintained statutory liquidity reserves.
The bank had also exceeded single group exposure limit in respect of a bank guarantee amounting to Rs five crore. The bank had sanctioned unsecured advances in excess of prescribed limits.
Next inspection on March 31, 2011 revealed that some irregularities, which were pointed out in pervious statutory inspection, were persistent. Its credit deposit ratio had increased to 148.53 per cent, much beyond the prudential upper limit of 70 per cent.
The files and relevant records of the cases, where exposure limit had been exceeded, were not made available to the Inspecting Officer of Reserve Bank during the inspection. The bank did not make any provision against the bank guarantee amounting to Rs five crore invoked by Mahamedha Urban Co-operative Bank Ltd., Ghaziabad.
The statutory inspection conducted by the Reserve Bank of India on March 31, 2012 revealed that many irregularities and violations which were pointed out in the previous inspections were persisting.
Overdraft was allowed in a current account related to the former Chairman of the bank, which was regularised by opening dummy loan accounts and transferring the funds to the current account.
These dummy loan accounts were closed later by allowing overdrawals in the current accounts. By periodically resorting to such kite – flying, an amount of Rs 1010.00 lakh had been siphoned off from the bank without any security thereagainst.
The Reserve Bank of India, therefore, cancelled the licence of the bank in the interest of bank’s depositors.