RBI shuts down a bank for securing trust of depositors on the banks

Various incidents happened in the past but this is the latest instance of the Central bank shutting down the weakly run collective bank. Institutional disappointments and instigated penal actions have been illustrated as the reason for closing off.

“With the cancellation of license and commencement of liquidation proceedings, the process of paying the depositors of The Madgaum Urban Co-operative Bank Limited, Margao, Goa as per the DICGC Act, 1961 will be set in motion,” RBI said.

The bank will not be able to do ‘banking’ in the future. Accepting a certain amount of deposits or repaying them must not happen. Why has RBI invalidated the license of the bank? The reason behind it disclosed by RBI is inadequate capital and profiting possibilities. The current financial situation of the bank was weak and depositors can get disappointed in the future if this bank fails to provide them with their money. RBI has sent a circular to the office of the Registrar of Cooperative Societies, Goa.

An order has been issued for spiraling up the bank and appointing an official liquidator. 99% of depositors will attain full amounts of their assurances from Deposit Insurance & Credit Guarantee Corporation (DICGC). Various incidents happened in the past but this is the latest instance of the Central bank shutting down the weakly run collective bank. Institutional disappointments and instigated penal actions have been illustrated as the reason for closing off.

As per the DICGC Act, 1961, the procedure of paying deposits to depositors will begin shortly. RBI also said, “On liquidation, every depositor will be entitled to receive deposit insurance claim amount of his/her deposits up to a monetary ceiling of Rs 5,00,000 from the DICGC, subject to the provisions of the DICGC Act, 1961.” 

According to the Banking regulation act, 1949. The bank has failed to fulfill the requisites of section 22(3) (a), 22 (3) (b), 22(3)(c), 22(3) (d), and 22(3)(e), etc. It will be prejudiced to continue the working of this bank as far as the security of depositors is concerned.  

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