On Saturday, the Reserve Bank of India announced the cancellation of a CKP Co-operative bank’s license to operate. The cancellation will come into effect from the close of business on April 30, 2020. The unsustainable shape of bank’s financial position was the primary reason behind this decision. But, RBI reassured, “Out of 132170 depositors of the bank, about 99.2% will get full payment of their deposits from DICGC.”
In an order, the central bank maintained that the CKP Co-operative Bank Ltd. was unable to pay any of its current or future depositors. “The bank is not satisfying the requirement of minimum capital and reserves, capital adequacy and earning prospects and also stipulated minimum regulatory capital requirement of 9%,” it said.
In this order, the Registrar of Co-operative Societies, Pune, Maharashtra, was requested to issue an order to bring all the bank’s outstanding affairs to a close and appoint a liquidator.
On Saturday, the RBI declared, “The CKP Co-operative Bank Ltd., Mumbai, is prohibited from conducting the enterprise of ‘banking’ which incorporates acceptance of deposits and reimbursement of deposits as defined in Section 5 (b) and Section 56 of the Banking Regulation Act, 1949, with immediate effect.”
“The affairs of the bank were and are being conducted in a manner detrimental to the public interest and interest of the depositors and that the general character of the management of the bank is prejudicial to the interest of depositors as also public interest,” the RBI explained. The bank’s efforts for revival have been far from adequate though the bank had been given ample time and opportunity and dispensations.
Therefore, RBI insisted that the bank’s revival is well nigh impossible. “There is no concrete revival plan or proposal for merger with another bank. Credible commitment towards revival from the management is not visible,” the central bank stated.
As of November-end 2019, CKP Co-op Bank, as per its website, had deposits aggregating ₹485.56 Crore while it had loaned out a total of ₹161.17 Crore. With the completion of the bank’s liquidation process, every depositor is entitled to repayment of his/her deposits up to a monetary ceiling of ₹5 lakh from the Deposit Insurance and Credit Guarantee Corporation (DICGC) as per the DICGC Act, 1961.
This RBI decision comes in time with its need to stabilize and remove any redundant actors in our crisis-ridden economic landscape.