The Reserve Bank of India (RBI) has cancelled the licence of Vijayawada’s over a century- old Durga Cooperative Bank, as the bank’s bad debts and interest are close to Rs. 200 crore. Over the past few years, the bank has been managed in a way that it has gone bankrupt due to the reckless granting of loans and non-compliance with RBI guidelines.
The cancellation of RBI’s permission to Durga Co-operative Urban Bank in Vijayawada’s old town has created a stir. The bank’s condition has become deplorable due to irregularities in the appointment of bank directors due to increased political interference in the last five years. The bank was established in 1926.
The bank is facing problems such as sanctioning loans against the rules, granting loans on patta lands without proper checks, and non-recovery of the same. It has a rich history. Over the years, due to excessive political interference, the bank was heading towards collapse. Bad debts increased in the bank.
The bank reached a point where even those who had made deposits could not make payments even after the deadline. Despite repeated warnings from the Cooperative Registrar in the past that the survival of the bank would be questionable, action was stopped with the support of public representatives.
RBI officials explained that since about 95 percent of the bank’s depositors have deposits of less than Rs 5 lakh, they will be paid in phases. It is said that a decision has to be taken at a higher level on deposits of more than Rs 5 lakh for five years.
Durga Cooperative Urban Bank has announced that its license is being cancelled under the Banking Regulation Act 1949 due to lack of adequate capital and lack of operational capacity of the bank. RBI stated that allowing the bank’s operations would harm the interests of depositors.
RBI announced that banking business activities will cease after November 12, 2024. RBI has directed the Commissioner of Co-operation and Registrar of Co-operative Societies to close the bank and appoint a liquidator. In liquidation, each depositor will be paid an insurance claim on their deposit. The maximum amount paid will be Rs 5 lakhs through the Deposit Insurance and Credit Guarantee Corporation.
As per the bank records, 96 per cent of the depositors are eligible for this compensation. The RBI has clarified that the entire amount of the deposits will be received from the DICGC. The exercise is being carried out on deposits exceeding Rs 5 lakhs.