The Reserve Bank of India (RBI) on July 23 cancelled the licence of The Mahabhairab Cooperative Urban Bank Ltd., Tezpur, Assam. Consequently, the bank ceases to carry on banking business, with effect from the close of business on July 24, 2024. The Registrar of Cooperative Societies, Assam has also been requested to issue an order for winding up the bank and appoint a liquidator for the bank, the RBI said.
The Reserve Bank cancelled the licence of the bank as the bank does not have adequate capital and earning prospects, the RBI said. The continuance of the bank is prejudicial to the interests of its depositors, the RBI said.
Also, the bank 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, the RBI said.
Consequent to the cancellation of its licence, “The Mahabhairab Cooperative Urban Bank Ltd., Tezpur, Assam” is prohibited from conducting the business of ‘banking’ which includes, among other things, 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, the RBI said.
As per the data submitted by the bank, about 99.80% of the depositors are entitled to receive full amount of their deposits from DICGC.
So far this year, the RBI has cancelled the licenses of 7 cooperative banks citing various rule violations and pushing hundreds of depositors to uncertainty. As per RBI data, as of January 18, 2023, India has 351 district cooperative banks with a cumulative Rs 3.3 lakh crore loan book and Rs 4.12 lakh crore of deposits. As of March 2022, the gross non-performing assets (GNPA) of these banks stood at 11 percent and total accumulated losses amounted to Rs 7,753 crore. There were about 39 banks with capital adequacy less than the mandated 9 percent.
Cooperative banks, primarily catering to semi-urban and rural areas, play a crucial role in extending banking services to these regions. However, the sector is currently grappling with challenges such as dual regulation, financial instability, and local political interference.
The Reserve Bank of India (RBI) heightened its oversight of cooperative banks following the collapse of the Punjab and Maharashtra Cooperative (PMC) Bank in 2019. After discovering various irregularities during an on-site inspection, the RBI took decisive action on September 23, 2019, by issuing directives to PMC Bank. Subsequently, later in the same month, the RBI replaced PMC Bank’s board to manage the situation.