NEW DELHI: The Reserve Bank of India (RBI) has revoked the licence of the Sumerpur Mercantile Urban Cooperative Bank Limited located in Sumerpur, Pali district of Rajasthan. This decision has immediate effects, leading to the cessation of all banking activities by the bank from the end of business on the announced date.
The RBI’s drastic measure comes after assessing that the bank lacked sufficient capital and prospects for future earnings, which are critical for sustaining banking operations. Essentially, the bank’s financial framework was found to be inadequate to meet its current obligations, particularly in repaying its depositors in full.
As per the data submitted by the bank, 99.13 per cent of the depositors are entitled to receive full amount of their deposits from DICGC. As on November 30, 2023, DICGC has already paid Rs 45.22 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.
This situation posed a severe risk not only to the depositors’ interests but also to the broader public interest, as continuing the bank’s operations could have led to further financial disarray and loss of public trust in the banking system.
Following the cancellation of its licence, the RBI has prohibited the Sumerpur Mercantile Urban Cooperative Bank from engaging in any form of banking business. This includes the acceptance of deposits and the repayment thereof, effectively putting a stop to its banking services.
In response to the liquidation proceedings, the Registrar of Cooperative Societies in Rajasthan has been requested to initiate the winding-up process and appoint a liquidator for the bank. This step is necessary to manage the dissolution of the bank’s assets and liabilities and to ensure that the depositors are not left in the lurch.
For the protection of depositors, the RBI has ensured coverage under the Deposit Insurance and Credit Guarantee Corporation (DICGC) Act, 1961. This insurance guarantees that each depositor will receive compensation up to a maximum of Rs 500,000, covering nearly 99.13% of the bank’s depositors according to the data provided by the bank itself. Up until November 30, 2023, DICGC has already reimbursed Rs 45.22 crore to eligible depositors, providing significant relief during this transition.
The RBI’s action underscores its commitment to maintaining the stability and integrity of the banking system and protecting depositor interests. While the closure of the bank marks a significant event for its customers and the local banking landscape, the measures taken aim to mitigate the impact on the affected depositors and maintain confidence in the financial system.
(With inputs from agencies)
