The Reserve Bank of India (RBI) has cancelled the license of Goa-based Madgaum Urban Cooperative Bank, with effect from 29 July 2021. This bank is latest to add to a long list of badly-run banks whose licenses have been cancelled by the RBI after their poor performance.
The banking regulator said the decision was taken as the Bank does not have adequate capital and earning prospects, and it would be unable to pay its present depositors in full in its present financial position.
“The RBI has, vide order dated 27 July 2021 cancelled the license of The Madgaum Urban Cooperative Bank, Margao, Goa. Consequently, the Bank ceases to carry on banking business, with effect from the close of business on 29 July 2021,” RBI says in a release.
The office of Registrar of Cooperative Societies at Goa has been requested by RBI to issue an order for winding up the bank and appoint a liquidator.
With the cancellation of license and commencement of liquidation proceedings, the process of paying the depositors as per the Deposit Insurance and Credit Guarantee Corporation (DICGC) Act, 1961 will be set in motion, the RBI says.
The Reserve Bank cancelled license of the Bank as the lender does not have adequate capital and earning prospects, the central bank says. “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 RBI said, adding, the continuance of the bank is prejudicial to the interests of its depositors.
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 says.
Consequent to the cancellation of its license, The Madgaum Urban Cooperative Bank 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 central bank says.
As per the data submitted by the bank, about 99% of the depositors will receive full amounts of their deposits from DICGC, the banking regulator added.