The Reserve Bank of India (RBI) canceled the banking license of CKP co-operative bank yesterday after reporting the financial position of the bank to be highly adverse and unsustainable. RBI already back in 2014 has restricted the bank from further taking deposits and lending new loans. The rise in non-performing assets in scheduled commercial banks back in 2017 and further deterioration of Asset quality in fourth-largest private sector bank, Yes Bank, has already forced RBI to find a suitable bank that could infuse capital and take over its operations. With State Bank of India coming forward to the rescue of the depositors the situation settled
Actions of RBI against failing co-operative banks
Meanwhile troubles started showing off in co-operative banks. In September 2019 RBI superseded the management of Punjab Maharashtra co-operative (PMC) bank for hiding its loan exposure to RBI. The depositors of the PMC bank queued up in front of its branch offices demanding back their deposits. Later yesterday another Mumbai based CKP co-operative bank’s banking license was revoked by RBI, it also observed that the co-operative bank did not have any concrete revival plans or merger with any other strong bank. The bank reported 97% of gross non-performing assets, out of which major portion is said to be availed by small and mid-size real estate businesses.
Are depositors safe?
The depositors are insured up to 5 lakhs by Deposit Insurance and Credit Guarantee Corporation (DICGC). This insurance previously was capped at 1 lakh per deposit which was amended during this year and announced in the union budget to boost depositor confidence. The bank as on April 30 had deposits of Rs.486 crore and loan book of Rs.158 crore. The depositors will be able to get their money back once the liquidation process of the bank gets completed. The concentration of advances to very few borrowers was observed in both the co-operative banks.
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