07 May, 2020
7 Min Read
RBI Cancels Licence of CKP
Part of: GS-III- Bank (PT-MAINS-PERSONALITY TEST)
Recently, the Reserve Bank of India (RBI) has cancelled the licence of Mumbai-based CKP Co-operative Bank.
RBI has cancelled the licence of the bank as the financial position of the bank was highly adverse and unsustainable. The bank is not in a position to pay its present and future depositors. The bank failed to meet the regulatory requirement of maintaining a minimum capital adequacy ratio of 9% (PT) and reserves.
RBI has asked the Registrar of Co-operative Societies, Maharashtra to start the process of winding up operations of CKP Co-operative bank and appoint a liquidator. On liquidation, every depositor of the bank is entitled to get up to Rs 5 lakh from the Deposit Insurance and Credit Guarantee Corporation.
In September last year, RBI had imposed restrictions on Punjab and Maharashtra Co-operative (PMC) Bank not to do any business for six months after it found major irregularities, which included financial irregularities, complete failure of internal control and systems, and wrongdoing and under-reporting of its lending exposure.
Capital Adequacy Ratio
Deposit Insurance and Credit Guarantee Corporation (PT)
DICGC came into existence in 1978 after the merger of Deposit Insurance Corporation (DIC) and Credit Guarantee Corporation of India Ltd. (CGCI) under the Deposit Insurance and Credit Guarantee Corporation Act, 1961.
It serves as a deposit insurance and credit guarantee for banks in India. It is a fully owned subsidiary of and is governed by the Reserve Bank of India. DICGC charges 10 paise per ?100 of deposits held by a bank. The premium paid by the insured banks to the Corporation is paid by the banks and is not to be passed on to depositors.
DICGC last revised the deposit insurance cover to ?5 lakh in Feb, 2020, raising it from ? 1 lakh since 1993. The protection cover of deposits in Indian banks through insurance is among the lowest in the world. The Damodaran Committee on ‘Customer Services in Banks’ (2011-PT) had recommended a five-time increase in the cap to ?5 lakh due to rising income levels and increasing size of individual bank deposits. Banks, including regional rural banks, local area banks, foreign banks with branches in India, and cooperative banks, are mandated to take deposit insurance cover with the DICGC.
A Co-operative bank is a financial entity which belongs to its members, who are at the same time the owners and the customers of their bank. It is distinct from commercial banks. Co-operative banks in India are registered under the States Cooperative Societies Act. The Co-operative banks are regulated by both Registrar of Co-operative Societies and Reserve Bank of India (RBI) and governed by the
Banking Regulations Act 1949.
Banking Laws (Co-operative Societies) Act, 1955.
Features of Cooperative Banks:
Difference between UCBs and Commercial Banks
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