RBI Cancels Licence of Millath Co-operative Bank On Inadequate Capital, Earning Prospects

The Reserve Bank of India (RBI) has cancelled the licence of Millath Co-operative Bank Ltd as “the bank does not have adequate capital and earning prospects”, among other reasons. The bank has ceased to carry on banking business, with effect from the close of business on Saturday (June 18). The Registrar of Cooperative Societies, Karnataka, has also been requested to issue an order for winding up the bank and appoint a liquidator for the bank.

“The Reserve Bank of India (RBI) has, vide order dated June 17, 2022, cancelled the license of ‘Millath Co-operative Bank Ltd., Davangere, Karnataka’. Consequently, the bank ceases to carry on banking business, with effect from the close of business on June 18, 2022. The Registrar of Cooperative Societies, Karnataka has also been requested to issue an order for winding up the bank and appoint a liquidator for the bank,” the central bank said in a statement dated June 18.

The RBI said it has cancelled the license as: a) the bank does not have adequate capital and earning prospects; b) the bank has failed to comply with the requirements of Sections 22(3) (a), 22 (3) (b), 22(3)(c), 22(3) (d) and 22(3)(e) read with Section 56 of the Banking Regulation Act, 1949; c) the continuance of the bank is prejudicial to the interests of its depositors; d) the bank with its present financial position would be unable to pay its present depositors in full; e) and public interest would be adversely affected if the bank is allowed to carry on its banking business any further.

“Consequent to the cancellation of its license, ‘Millath Co-operative Bank Limited, Davangere, Karnataka’ is prohibited from conducting the business of ‘banking’ which includes, among other things, acceptance of deposits and repayment of deposits as defined in Section 5(b) read with Section 56 of the Banking Regulation Act, 1949 with immediate effect,” the RBI said.

The RBI said that on liquidation, every depositor will be entitled to receive deposit insurance claim amount of his/her deposits up to a monetary ceiling of Rs 5 lakh from the Deposit Insurance and Credit Guarantee Corporation (DICGC), subject to the provisions of DICGC Act, 1961.

As per the data submitted by the bank, all the depositors will receive full amount of their deposits from DICGC. As on May 18, 2022, DICGC has already paid Rs 10.38 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.

Recently, the RBI also cancelled certificate of registration (CoR) of three NBFCs, including two housing finance companies. CoR of Noida-based Malik Motor Finance Limited has been cancelled. Housing finance companies whose registrations have been cancelled are — Aizawl-based North East Region Housing Finance Company Limited and Gurgaon-based Aryarth Housing Finance Limited.

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