The Reserve Bank of India (RBI) on Wednesday said it has cancelled the licence of Rupee Co-operative Bank Ltd, Pune in compliance with the Bombay High Court order dated 12 September 2017, and the order shall become effective after six weeks from today.
Consequently, the bank will cease to carry on banking business, with effect from 22 September 2022.
The Commissioner for Cooperation 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.
Interestingly, the banking regulator had granted a three-month extension on 1st June ending 31 August 2022 to the Rupee Co-operative Bank for operating under its all-inclusive directions. This was the 29th extension given by the RBI till date for this bank.The future of the stressed bank was looking unclear for the last many months, with several interested banks’ proposals for its merger under RBI scrutiny.
On liquidation, every depositor would be entitled to receive deposit insurance claim amount of his/her deposits up to a monetary ceiling of Rs5,00,000from Deposit Insurance and Credit Guarantee Corporation (DICGC) subject to the provisions of DICGC Act, 1961.
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 18 May 2022, DICGC has already paid Rs700.44 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.
Although reduced over the years, in June 2022, the Rupee Co-operative Bank had an accumulated loss of around Rs625 crore, and had around Rs823 crore in liquidity.
Rupee Co-operative Bank had submitted various options for resolution of the bank, which include an exploratory proposal for merger. The administrator of the bank Sudhir Pandit had said last year that the RBI had given an undertaking in the Bombay High Court to take an appropriate decision before 31 December 2022 with respect to the resolution of the bank.
Saraswat Bank, which had submitted its proposal in January 2022, had subsequently raised queries about the loss of business it would face as around Rs700 crore has been paid to Rupee Cooperative Bank account holders under the directive of the Deposit Insurance and Credit Guarantee Corporation (DICGC).
When Saraswat Cooperative Bank submitted its proposal, the DICGC had directed Rupee Cooperative Bank to start payment of deposits up to Rs5 lakh into accounts held then in Bank of Baroda. The corporation had asked Rupee Cooperative Bank to collect willingness forms from account holders. Subsequently, 64,024 people had applied and the corporation sanctioned payouts worth Rs700 crore. Interestingly, the RBI had given in-principle approval to the merger proposal 45 days after it was submitted. But when .the payout was given before the in-principle approval, Saraswat Bank had raised questions about the viability of the merger in May 2022.
The board of administrators of the Bank led by Mr Pandit had been trying to revive the troubled bank or merge it with a stronger bank for a while. Many proposals were received – from Maharashtra State Cooperative Bank, Mehsana Cooperative Bank and others.
In December 2022, Mr Pandit said investors have approached the bank and a multi-state schedule cooperative bank has submitted a preliminary proposal for a merger for approval to the RBI. The RBI had at that time invoked provisions of Section 18A (7) of the DICGC Amendment Act, 2021, and advised the DICGC to defer the refund of deposits up to Rs5 lakh for another ninety months, he said.
The bank has recovered a total Rs326.49 crore, earned operating profit aggregating to Rs70.82 crore during the last five years and disbursed Rs376.95 crore to 95,115 depositors under hardship withdrawal, according to the note shared by Mr Pandit in December 2022.
It may be recalled that here was a run on this bank sometime in 2002 and the board of the bank was dismissed. It was put under an administrator. According to some banking professionals who were advising the administrators, they were appalled that no proper records were available and the bank was unable to prepare its financial statements. The bank ought to have been put under moratorium at that time itself.
After five years under the 'supervision' of these administrators, in 2007, fresh elections were held for the board of directors and many who were responsible to get the bank into trouble in the first place were re-elected!