RBI revokes the banking licence of UP-based Urban Co-operative Bank

The Reserve Bank of India (RBI) on Thursday revoked the banking licence of “Urban Co-operative Bank Limited, Sitapur, Uttar Pradesh" with immediate effect. The decision comes as a response to severe financial irregularities and non-compliance with banking regulations, the central bank said in a release.

With the immediate cancellation of its licence, Urban Co-operative Bank is now prohibited from conducting any banking activities, including accepting and repaying deposits. The Commissioner and Registrar of Co-operative, Uttar Pradesh, have been instructed to initiate the process of winding up the bank and appoint a liquidator.

“Consequent to the cancellation of its licence, ‘Urban Co-operative Bank Limited, Sitapur, Uttar Pradesh’ is prohibited from conducting the business of ‘banking’ which includes, among other things, 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 release said.

Upon liquidation, depositors of Urban Co-operative Bank are entitled to claim amounts for their deposits, with a monetary ceiling of Rs 5 lakh per depositor. The Deposit Insurance and Credit Guarantee Corporation (DICGC) will oversee the distribution of these claims.

According to data submitted by the bank, 98.32 per cent of depositors are expected to receive the full amount of their deposits from DICGC.

The bank failed to meet the required capital standards and demonstrate positive earnings prospects, violating key provisions of the Banking Regulation Act, 1949, the release said.

The RBI emphasised that the bank's continued operation poses a significant risk to the interests of its depositors. The current financial position of the bank renders it unable to fully repay its depositors, a critical factor in the decision to revoke the licence.

The regulator said that allowing Urban Co-operative Bank to persist in its banking operations was deemed detrimental to public interest, prompting the RBI to take decisive action.