U.P. Bank Shut Down: RBI Cancels License of Urban Co-op Bank
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U.P. Bank Shut Down: RBI Cancels License of Urban Co-op Bank

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U.P. Bank Shut Down: RBI Cancels License of Urban Co-op Bank

In a major development, the Reserve Bank of India (RBI) has canceled the banking license of Urban Co-operative Bank Ltd., Sitapur, Uttar Pradesh, with immediate effect. The decision was announced on Friday, December 8, 2023, and has sent shockwaves through the state’s cooperative banking sector.

According to the RBI, the bank’s license was revoked due to its inadequate capital and earning prospects. The bank failed to comply with the provisions of the Banking Regulation Act of 1949, despite repeated warnings and directions from the central bank.

This development has raised concerns among depositors about the safety of their funds. However, the RBI has assured that it will take necessary steps to protect the interests of depositors.

The “Urban Co-operative Bank Ltd, Sitapur, Uttar Pradesh” license was revoked, according to the Reserve Bank of India (RBI), since the bank did not meet the requirements of the Banking Act and lacked sufficient capital and earning potential.

U.P.'s Urban Co-op Bank Loses License Due to Insufficient Capital
U.P.’s Urban Co-op Bank Loses License Due to Insufficient Capital (Image Source: Google)

As a result, starting on December 7 after business, the bank will no longer conduct banking operations. The RBI stated in a circular that the Commissioner and Registrar of Cooperative, Uttar Pradesh, has also been asked to issue an order for winding up the bank and appoint a liquidator for the bank.

The RBI cited several reasons for canceling the license, including the fact that the bank’s continued operation would be detrimental to its depositors’ interests, that the bank’s current financial situation would prevent it from paying all of its current depositors, and that continuing the bank’s banking operations would be in the public interest.

“Urban Co-operative Bank Ltd. Sitapur, Uttar Pradesh” is forbidden from doing the business of “banking” following the termination of its license, which includes, among other things, accepting and repaying deposits. This prohibition is effective immediately.”

The central bank stated that upon liquidation, each depositor would be eligible to receive the full amount of their savings under the Deposit Insurance and Credit Guarantee Corporation (DICGC), up to a maximum of ₹5 lakh.

The RBI stated that 98.32% of the depositors are eligible to retrieve their whole deposit from DICGC based on the facts that the bank presented.

U.P. Bank Shut Down: RBI Cancels License of Urban Co-op Bank
U.P. Bank Shut Down: RBI Cancels License of Urban Co-op Bank (Image Source: Google)

Here are some key points about the situation:

  • License cancellation date: December 8, 2023
  • Bank name: Urban Co-operative Bank Ltd., Sitapur, Uttar Pradesh
  • Reasons for cancellation: Inadequate capital, no earning prospects, and non-compliance with the Banking Regulation Act, 1949
  • Impact: Depositors may face difficulties accessing their funds

RBI’s action has sparked various reactions:

  • Depositors: Many are concerned about the fate of their money and are seeking information about how to retrieve their funds.
  • Co-operative banking sector: This incident has raised concerns about the overall health of the co-operative banking sector in the U.P.
  • Government: The state government is likely to face pressure to address the crisis and provide relief to affected depositors.

Read This Also: Regulatory Action: RBI Penalizes 4 Co-operative Banks, Cancels License of 1

The RBI has announced the following measures to protect depositors:

  • A scheme for deposit insurance will be put in place to ensure that depositors get their money back.
  • The RBI will appoint an administrator to take over the bank’s operations and manage its assets.
  • The administrator will work towards recovering bad loans and maximizing the value of the bank’s assets.

This incident highlights the importance of choosing a safe and reliable bank. It also underscores the need for stricter regulations and closer monitoring of cooperative banks in India.

Further updates are expected as the situation unfolds. This article will be updated with more information as it becomes available.

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