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Home / Companies / News /  RBI to wind up Deccan Urban Co-operative Bank, cancels license. What will happen to depositors money?
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The Reserve Bank of India (RBI) has cancelled the license of Karnataka-based Deccan Urban Co-operative Bank. Also, RBI has ceased the bank from carrying on any banking business, with effect from the close of business on Thursday. Further, it has directed the state's Commissioner for Cooperation and Registrar of Cooperative Societies to issue an order for winding up the bank and appoint a liquidator for the bank.

RBI cancelled the bank's license due to various factors.

Firstly, the bank does not have adequate capital and earning prospects. As such, it does not comply with the provisions of Section 11(1) and Section 22 (3) (d) read with Section 56 of the Banking Regulation Act, 1949.

Secondly, the bank has failed to comply with the requirements of 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.

RBI said, "the continuance of the bank is prejudicial to the interests of its depositors."

According to the central bank, Deccan Urban Co-operative Bank with its current financial position will be unable to pay its present depositors in full.

Lastly, the public interest would be adversely affected if the bank is allowed to carry on its banking business any further.

Thereby, RBI has prohibited Deccan Urban Co-operative Bank from conducting the business of ‘banking’ which includes, among other things, acceptance of deposits and repayment of deposits.

What will happen to depositors money? 

During the liquidation, RBI said, every depositor would be entitled to receive deposit insurance claim amount of his/her deposits up to a monetary ceiling of 5 lakh from Deposit Insurance and Credit Guarantee Corporation (DICGC) subject to the provisions of the DICGC Act, 1961.

RBI highlighted that data from the bank showed that more than 99% of the depositors are entitled to receive the full amount of their deposits from DICGC.

As of August 06, 2022, DICGC has already paid 13.07 crore of the total insured deposits under the provisions of Section 18A of the DICGC Act, 1961 based on the willingness received from the concerned depositors of the bank.

DICGC is a special division of RBI, established in July 1978, to provide insurance for deposits and guarantees over credit facilities. It issues insurance to all bank deposits including savings, fixed deposits current, and recurring deposits with a limit up to 5 lakh.

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