Millath Co-operative Bank Ltd., Davangere, Karnataka, had its licence suspended by the Reserve Bank of India (RBI), resulting in a capital shortage. As a result, the bank’s banking operations will come to an end at the end of the day. According to a press release from the RBI, the Registrar of Cooperative Societies in Karnataka has also been asked to issue an order winding up the bank and appoint a liquidator.
- The bank lacks sufficient capital and earnings potential. As a result, it violates Sections 11(1) and 22(3)(d) of the Banking Regulation Act, 1949, as well as Section 56 of the Act, according to RBI.
- The Reserve Bank has revoked the bank’s licence because it lacked adequate capital and earning potential, according to the RBI, which also stated that the bank’s continuing existence would be detrimental to the interests of its depositors.
- If the bank is allowed to continue operating, it will be unable to pay its current depositors in full, and the public interest will be harmed, according to RBI’s official statement.
- The Reserve Bank of India has also stated that, upon liquidation, every depositor will be entitled to a deposit insurance claim sum of up to Rs. 5,00,000/- from the Deposit Insurance and Credit Guarantee Corporation (DICGC), subject to the provisions of the DICGC Act, 1961.
- According to the bank’s information, all depositors will get the entire amount of their deposits from the Deposit Insurance and Credit Guarantee Corporation (DICGC). As of May 18, 2022, the DICGC had already paid out 10.38 crore of total insured deposits under the requirements of Section 18A of the DICGC Act, 1961, based on the willingness of the bank’s depositors.
DICGC Act, 1961:
On August 21, 1961, the Deposit Insurance Corporation (DIC) Bill was introduced in Parliament. The Bill received the President’s assent on December 7, 1961, after it was passed by Parliament, and the Deposit Insurance Act of 1961 went into effect on January 1, 1962. Only functioning commercial banks were initially covered by the Deposit Insurance Scheme. The State Bank of India and its subsidiaries, as well as other commercial banks and foreign bank branches operating in India, were included.
Deposit Insurance and Credit Guarantee Corporation (DICGC):
The Deposit Insurance and Credit Guarantee Corporation Act, 1961, says that it is an Act to provide for the establishment of a Corporation for the purpose of deposit insurance and credit guaranteeing, as well as other things connected with or incidental thereto.