Reserve Bank of India cancels the licence of CKP Co-operative Bank

The licence was cancelled on the grounds that its financial position was “highly adverse and unsustainable”

The CKP Co-operative Bank of Mumbai ceased operating on 30 April, two days after having its license cancelled by regulator Reserve Bank of India (RBI).

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

The co-operative bank’s license was cancelled on the ground that its financial position was “highly adverse and unsustainable”. Announcing its decision, the Reserve Bank of India said CKP has “no concrete revival plan or proposal for merger with another bank”, adding that there was no visible “credible commitment towards revival from the management”.

The regulator further said that the bank was not satisfying the requirement of minimum capital and reserves and capital adequacy and earning prospects or the stipulated minimum regulatory capital requirement of 9%.

Related: Reserve Bank of India gives approval for conversion of co-operative bank

RBI added that the affairs of the bank had been conducted in a manner “detrimental to the public interest and interest of the depositors”. CKP found itself unable to pay its present and future depositors. With the bank being liquidated, every depositor is entitled to repayment of their deposits up to a monetary ceiling of Rupees 500,000 (£5,316) from the Deposit Insurance and Credit Guarantee Corporation (DICGC). Around 99.2% of deposits fall within this amount. In November 2019 bank’s total deposits stood at INR 4.85m (£51,562) and its loan book stood at INR 1.61m (£17,116). This means its loan to deposit ratio was 33%, below the ideal rate of 80-90%.

Urban co-operative banks have found themselves under tight scrutiny in recent months due to a scandal involving one of the sector’s largest banks. The Maharashtra Co-operative Bank was taken over by RBI last year after concerns about the accuracy of its financial statements.

More than 20 co-op banks are now under RBI’s administration. RBI has also revised its Supervisory Action Framework (SAF) to initiate prompt corrective action (PCA) for urban co-operative banks (UCBs) facing financial stress.

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