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RBI Cancels License of Purvanchal Co-operative Bank

The Reserve Bank of India (RBI) on June 14, 2024, revoked the license of Purvanchal Co-operative Bank, located in Ghazipur, Uttar Pradesh, due to inadequate capital and poor earnings prospects. RBI has cancelled the license of 6 other banks since January 2024 for similar reasons.

The bank did not comply with the provisions of Section 11(1) and Section 22 (3) (d) read with Section 56 of the Banking Regulation Act, 1949. Further, Sections 22(3) (a), 22 (3) (b), 22(3)(c), 22(3) (d) and 22(3)(e) read with Section 56 of the Banking Regulation Act, 1949 were also not complied with.

With the cancellation of its license, Purvanchal Co-operative Bank is prohibited from conducting any banking activities. This includes the acceptance of deposits and repayment of existing deposits. Directions have been issued for the bank’s winding up and the appointment of a liquidator. Following the liquidation, depositors are eligible to receive insurance claims of up to Rs 5 lakh per depositor from the Deposit Insurance and Credit Guarantee Corporation (DICGC).

According to data submitted by Purvanchal Co-operative Bank, approximately 99.51% of the bank’s depositors are entitled to receive the full amount of their deposits through the DICGC insurance scheme. By May 30, 2024, the DICGC had already disbursed Rs 12.63 crore in insured deposits to the bank’s depositors who had expressed their willingness to claim. This payout represents a significant portion of the total insured deposits, ensuring that most depositors receive their due amounts.

The RBI’s decision highlights the need for maintaining adequate capital and earning prospects to safeguard depositor interests and ensure the stability of the banking sector.

In 2018, the RBI had imposed a monetary penalty of Rs. 5 Lakhs on the bank for violation of RBI Instructions/Guidelines on Finance for Housing Schemes – UCBs, Extending loans and advances to Directors/their relatives/concerns, in which they are interested, Exceeding maximum limit on unsecured advances, Income Recognition, Asset Classification, Provisioning and Other Related Matters – UCBs and Exceeding individual/ single exposure ceiling for lending operations.