RBI cancels licence of CKP Co-operative Bank; depositors to get up to Rs 5 lakh

The Reserve Bank of India on Saturday cancelled the licence of CKP Co-operative Bank, with effect from the close of business on April 30, 2020. On liquidation, depositors are entitled to repayment of their deposits up to Rs 5 lakh only from the Deposit Insurance and Credit Guarantee Corporation (DICGC) as per usual terms and conditions, the RBI said in a press release.

"The financial position of the bank is highly adverse and unsustainable. There is no concrete revival plan or proposal for merger with another bank. Credible commitment towards revival from the management is not visible," the RBI said.

The Registrar of Co-operative Societies, Pune, Maharashtra, has been asked to issue an order for winding up the affairs of the Mumbai-based CKP Co-operative Bank and appoint a liquidator for the bank, it said.

Following the cancellation of its licence, the bank is prohibited accepting deposits and repayment of deposits with immediate effect.

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"With the cancellation of licence and commencement of liquidation proceedings, the process of paying the depositors of The CKP Co-operative Bank Ltd., Mumbai, as per the DICGC Act, 1961 will be set in motion," the RBI said.

The central bank cancelled the licence of the bank as the bank did not meet the requirement of minimum capital and reserves, capital adequacy, earning prospects and also stipulated minimum regulatory capital requirement of 9 per cent.

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"The bank is not in a position to pay its present and future depositors, thereby not complying with Section 22(3) (a) read with Section 56 of the Act," it added.

The RBI said that the affairs of the bank were also conducted in a manner detrimental to the public interest and interest of the depositors. "The bank has not been complying with provisions of Section 22 (3)(b) and (c) of the Act," it added.

According to the RBI, the bank's efforts for revival "have been far from adequate though it has been given ample time and opportunity and dispensations". "No merger proposal has been received in respect of the bank. Thus, in all likelihood, public interest would be adversely affected if the bank were allowed to carry on its business any further," the RBI said.

Established in 1915, CKP Co-operative Bank is one of the oldest urban co-operative bank in Mumbai. The bank has head office at Matunga and has 8 branches spread across Mumbai and Thane Districts. As of November 2019, CKP Co-operative Bank's had a deposit base of Rs 485.56 crore, while loan book stood at Rs 161.17 crore. The bank's net worth, the total value of its assets less the total of all liabilities, was minus Rs 239.18 crore.

In September last year, the Reserve Bank of India 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.