The Reserve Bank of India (RBI) has cancelled the licence of Bhagyodaya Friends Urban Cooperative Bank Limited at Warud in Amravati district. With this, the RBI has prohibited the bank from conducting business with immediate effect. The Commissioner for Cooperatives and Registrar of Cooperative Societies, Maharashtra has also been requested to issue an order for winding up the bank and appoint a liquidator for the bank. The RBI has, vide its order dated April 20, 2021, cancelled the licence of Bhagyodaya Friends Urban Co-operative Bank. Consequently, the bank ceased to carry on banking activities, with effect from April 22. The Reserve Bank, in its cancellation of the licence order, cleared that the bank did not have adequate capital and earning prospects. As such, it did not comply with the provisions of section 11(1) and section 22 (3) (d) read with section 56 of the Banking Regulation Act, 1949. The bank has failed to comply with the requirements of section 22(3) (a), 22(3) (b), 22(3) (c), 22(3) (d) and 22(3) (e) read with section 56 of the Banking Regulation Act, 1949. The order stated that the continuance of the bank is prejudicial to the interests of its depositors. The bank with its present financial position would be unable to pay its present depositors in full and public interest would be adversely affected if the bank is allowed to carry on its banking business any further.
Consequent to the cancellation of its licence, Bhagyodaya Friends Urban Co-operative Bank is prohibited from conducting the business of ‘banking’ which includes 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. With the cancellation of licence and commencement of liquidation proceedings, the process of paying the depositors of the bank as per the DICGC Act, 1961 will be set in motion. As per the data submitted by the bank; more than 98 percent of the depositors will receive full amounts of their deposits from Deposit Insurance and Credit Guarantee Corporation (DICGC). On liquidation, every depositor would be entitled to receive deposit insurance claim amount of his/her deposits up to a monetary ceiling of Rs.5lakh from the DICGC subject to the provisions of the DICGC Act, 1961. The the Bhagyodaya Friends Urban Co-operative Bank Limited is functioning in Warud from last about 20 years and has large customer base and deposits in crores. The decision has obviously left the customers jittery.