The Reserve Bank of India (RBI) on June 18 announced that the license of Milath Co-operative Bank Ltd., Davangere, Karnataka was suspended, leading to capital crunch. Consequently, the Bank will cease to conduct banking operations at the close of business on June 18, 2022. “The Registrar of Co-operative Societies, Karnataka has also been requested to issue an order for winding up the bank and appoint a liquidator for the bank,” RBI said in a press release.
The bank does not have sufficient capital and earning potential. As such, it does not comply with the provisions of Section 11(1) and Section 22(3)(d) read with Section 56 of the Banking Regulation Act, 1949, says RBI.
According to RBI, the bank’s license has been terminated by the Reserve Bank as it lacks suitable capital and earning capacity, stating that the continued existence of the bank would be detrimental to the interests of its depositors. RBI in its official statement said that the bank with its current financial position would be unable to make full payments to its existing depositors, and public interest would be adversely affected if the bank is allowed to carry on with its banking business.
RBI has further stated that on liquidation, every depositor shall be entitled to receive the amount of his deposit up to the monetary limit of the deposit insurance claim amount. 5,00,000/- from Deposit Insurance and Credit Guarantee Corporation (DICGC) subject to the provisions of the DICGC Act, 1961.
As per the data furnished by the bank, all depositors will receive the full amount of their deposits from the Deposit Insurance and Credit Guarantee Corporation (DICGC). As of May 18, 2022, DICGC has already paid 10.38 crore of the total sum insured on the basis of willingness received from the concerned depositors of the bank under the provisions of section 18A of the DICGC Act, 1961, RBI said in its press note.