RBI Cancels License of the City Co-operative Bank, Maharashtra

Context

Recently the Reserve Bank of India canceled the licence of the City Co-operative Bank, Maharashtra for lacking adequate capital and earning prospects.

About

On liquidation, every depositor could be entitled to receive deposit insurance claim amount of his/her deposits up to a monetary ceiling of Rs 5 lakh only from Deposit Insurance and Credit Guarantee Corporation (DICGC) difficulty to the provisions of DICGC Act, 1961.

What are Cooperative Banks?

• Cooperative Banks refer to those financial institutions under the Banking System in India that operate on the ideas of cooperation and mutual benefit for their members.
• They belong to their contributors who are both the owners and customers of the banks.
• They function on the principle of “one character, one vote” in choice-making. Along with lending, those banks additionally accept deposits.

Regulation of Cooperative Banks in India

• These banks in India, widely, come under the dual control of:
  • Reserve Bank of India: Under the Banking Regulation Act, 1949, and the Banking Laws (Application to Co-operative Societies) Act, 1965, the RBI is chargeable for regulating banking aspects of those banks, consisting of capital adequacy, risk control, and lending norms.
  • Registrar of Co-operative Societies (RCS) of respective State or Central Government: They are chargeable for law of management-related components of those banks, which include incorporation, registration, control, audit, supersession of board of directors, and liquidation.

Structure of Cooperative Banks in India

• These banks, beneath the Banking System in India, are in most cases categorized into – Rural Cooperative Banks (RCBS), and Urban Cooperative Banks (UCBS). 
• They are further sub-categorized as proven under:
  • Structure of Cooperative Banks in India

Urban Cooperative Banks (UCBs)

• They operate in urban and semi-urban regions and specially lend to small debtors and businesses.
• Based on their law regime, they are categorized into two sorts – Scheduled Banks and Non-Scheduled Banks.

Rural Cooperative Banks (RCBs)

• They focus on serving the economic needs of people in rural regions.
• Depending on the form of lending, they are divided into 2 sub-classes – Short-Term Structures, and Long-Term Structures.
• Short-Term Structures are divided into State Cooperative Banks, District Cooperative Central Banks (DCCBs) and Primary Agricultural Credit Societies (PACS).
• Long-Term Structures are divided into State Cooperative Agricultural and Rural Development Banks (SCARDBs) and Primary Cooperative Agricultural and Rural Development Banks (PCARDBs).

Source: The Indian Express

Prelims PYQ

1. With reference to ‘Urban Cooperative Banks’ in India, consider the following statements:

• They are supervised and regulated by local boards set up by the State Governments.

• They can issue equity shares and preference shares.

• They were brought under the purview of the Banking Regulation Act, 1949 through an Amendment in 1966.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 and 3 only

(c) 1 and 3 only

(d) 1, 2 and 3

Ans: (b)

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