RBI cancels Rupee Co-operative's licence; lender to cease business Sep 22

More than 99% of depositors of Pune-based lender to receive the full amount, says regulator

The Reserve Bank of India (RBI) on Wednesday cancelled the licence of the Rupee Co-operative Bank, saying the Pune-based lender does not have adequate capital, earning prospects and it does not comply with regulations.

Rupee Co-operative will cease to conduct business from September 22. Maharashtra’s Commissioner for Cooperation and Registrar of Cooperative Societies will issue an order for winding up the bank and appoint a liquidator, the RBI said.

The regulator said that upon liquidation every depositor of Rupee Co-operative would be entitled to an insurance claim of up to Rs 5 lakh in accordance with the provisions of the Deposit Insurance and Credit Guarantee Corporation Act (DICGC).

“As per the data submitted by the bank, more than 99% of the depositors are entitled to receive full amount of their deposits from DICGC. As on May 18, 2022, DICGC has already paid Rs 700.44 crore of the total insured deposits under the provisions of Section 18A of the DICGC Act, 1961 based on the willingness received from the concerned depositors of the bank,” the RBI said.

Rupee Co-operative would not be able to pay its depositors in full and public interest would be detrimentally affected if it was allowed to carry on business, said the RBI.

The RBI, in December 2021, granted Rupee Co-operative an extension for its banking licence from the RBI for three months. It was the 27th such extension for the company.

Sudhir Pandit, the bank’s administrator at that time, said Rupee Co-operative had recovered a total Rs 326.49 crore, earned operating profit aggregating to Rs 70.82 crore during the last five years and disbursed Rs 376.95 crore to 95,115 depositors under hardship withdrawal.

Rupee Co-operative had submitted several options for resolution, including a proposal for a merger.

In April 2022, reports said that the proposed merger of the bank with the Saraswat Cooperative Bank had met with hurdles as the latter expressed doubts about the viability of the amalgamation.

After submitting a proposal to the RBI in January 2022, Saraswat Bank had raised concerns about a potential loss of business as a sum of Rs 700 crore had been paid to the account holders of the Rupee Co-operative Bank under the provisions of the DICGC Act, the reports said.

In September 2021, the DICGC had said that it had taken a decision to pay depositors of 21 stressed co-operative banks a sum of Rs 5 lakh within 90 days.

Apart from Rupee Co-operative, other lenders on the list included Maharashtra-based banks such as Punjab and Maharashtra Cooperative Bank, Kapol Cooperative Bank, Maratha Cooperative Bank and City Cooperative Bank.

The RBI said last month it has decided to adopt a four-tiered regulatory framework for urban co-operative banks (UCBs) based on size of deposits, with an aim to strengthen their financial soundness.