Why does RBI cancel the license of Pune-based Seva Vikas Co-operative Bank..

The license of Seva Vikas Co-operative Bank cancelled –

The license of Pune-based Seva Vikas Co-operative Bank is cancelled by the Reserve Bank of India RBI. The bank ceases to carry on banking business, with effect from the close of business on October 10, 2022. Earlier in August 2022, it had cancelled the license of Pune-based Rupee Cooperative Bank. RBI action is facing a legal challenge in the Bombay High Court. The Commissioner for Cooperation and Registrar of Cooperative Societies, Maharashtra have been requested to issue an order for winding up the bank and appoint a liquidator.

What is the reason behind the Cancellation ?

The lender did not have adequate earning prospects and failed to comply with regulations under the Banking Regulation Act and thus the license is cancelled. The continuance of the bank is prejudicial to the interests of its depositors, and the public interest would be adversely affected if the bank is allowed to carry on its banking business any further. Post the cancellation of its license, the bank is prohibited from conducting the business of banking which includes, among other things, acceptance and repayment of deposits. The existence of banks is not in the interests of depositors. Banks in their current financial position will not be able to pay existing depositors in full. It added that the public interest would be adversely affected if the bank was allowed to conduct further banking operations.

Depositors are entitled to receive the full amount –

According to the data submitted by the bank, about 99% of the depositors are entitled to receive the full amount of their deposits from Deposit Insurance and Credit Guarantee Corporation (DICGC). As on 14 September 2022, DICGC has already paid Rs152.36 crore of the total insured deposits. This payment is made in compliance with the provisions of the DICGC Act, 1961 based on the willingness received from the concerned depositors of the bank.

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