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Home >Industry >Banking >RBI cancels licence of Goa-based co-op bank. What'll happen to depositors' money

Reserve Bank of India (RBI) has cancelled the licence of Goa-based Madgaum Urban Cooperative Bank, with effect from July 29, 2021. RBI said the decision was taken as the bank doesn't have adequate capital and earning prospects, and its would be unable to pay its present depositors in full in its present financial position.

"Reserve Bank of India (RBI) has, vide order dated July 27, 2021 cancelled the licence of The Madgaum Urban Co-operative Bank Limited, Margao, Goa. Consequently, the bank ceases to carry on banking business, with effect from the close of business on July 29, 2021," RBI stated in an order on Thursday.

The Office of Registrar of Cooperative Societies, Goa has also been requested to issue an order for winding up the bank and appoint a liquidator for the bank, the central bank further added.

On reasons for cancelling the bank's licence, RBI said, "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."

"The bank has failed to comply with the requirements of section 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," it added.

The continuance of the bank is prejudicial to the interests of its depositors, the central bank noted.

"Consequent to the cancellation of its licence, The Madgaum Urban Co-operative Bank Limited, Margao, Goa is prohibited from conducting the business of ‘banking’ which includes 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 statement read.

With this, the bank will not be able to accept deposits or make payments.

With the RBI action against Madgaum Urban Co-operative Bank, the process to return the money of depositors will be set in motion. As per the data submitted by the bank, about 99 per cent of the depositors will receive full amounts of their deposits from Deposit Insurance and Credit Guarantee Corporation (DICGC), RBI clarified.

On liquidation, every depositor is entitled to receive deposit insurance claim amount of their deposits up to a monetary ceiling of 5 lakh from the DICGC, subject to the provisions of the DICGC Act, 1961.

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