RBI Revokes Licence of Purvanchal Cooperative Bank Over Insufficient Capital

The RBI announced this decision in an official statement, citing concerns over Purvanchal Cooperative Bank's financial stability and its ability to serve its depositors

The RBI said that Purvanchal Cooperative Bank's current financial status makes it incapable of fully repaying its depositors. ( Image Source :PTI )

The Reserve Bank of India (RBI) has revoked the licence of Purvanchal Cooperative Bank, Ghazipur, due to insufficient capital and poor earning prospects. The RBI announced this decision in an official statement, citing concerns over the bank's financial stability and its ability to serve its depositors.

In response to the RBI's decision, the Commissioner for Cooperation and Registrar of Cooperative Societies, Uttar Pradesh, has been directed to initiate the process of winding up the bank and appoint a liquidator to manage the proceedings.

Upon liquidation, depositors will be eligible to claim up to Rs 5 lakh from the Deposit Insurance and Credit Guarantee Corporation (DICGC). According to data provided by Purvanchal Cooperative Bank, approximately 99.51 per cent of the depositors will receive the full amount of their deposits through DICGC.

The RBI said that the cooperative bank's current financial status makes it incapable of fully repaying its depositors. "The bank does not have adequate capital and earning prospects," the statement read, adding that allowing the bank to continue operations would negatively impact public interest.

Following the cancellation of its licence, Purvanchal Cooperative Bank is prohibited from conducting any banking activities, including accepting and repaying deposits.

Furthermore, the RBI noted that as of May 30, 2024, DICGC has already disbursed Rs 12.63 crore of the total insured deposits based on the claims received from the bank's depositors.

Meanwhile, the central bank on June 7 maintained the benchmark interest rates at unchanged at 6.5 per cent by 4:2 majority, marking the eighth consecutive time the rates have remained unchanged. The last time the central bank hiked its interest rate was in February 2023. The rate increase cycle was paused in April last year after six consecutive rate hikes, aggregating to 250 basis points since May 2022.