Failed CKP cooperative bank depositors among the first recipients of higher deposit coverage

Mumbai: The depositors of the Mumbai-based failed CKP Cooperative Bank will be among the first recipients of higher deposit insurance coverage of Rs 5 lakh. The bank’s license was canceled by the Reserve Bank last week and the government raised the minimum deposit insurance coverage from Rs 1 lakh to Rs 5 lakh in its February budget announcement.

The bank, which has been under RBI’s administration since 2014, failed to come up with a satisfactory revival plan, after which the bank regulator canceled its license. The majority of the bank’s depositors now receive 100 percent of their money back. “About 99.2% CKP Co-operative bank depositors to get money back under deposit insurance, ”RBI spokesman Yogesh Dayal said in a tweet.

Deposit insurance and Credit Guarantee Corporation (DICGC) Annual Report for 2018-19 shows that although a total of Rs 296 crore was paid for claims from 27 commercial banks since its inception in 1962, Rs 4,822 crore of claims was paid for 351 cooperative banks as these banks were eligible for deposit insurance in 1968. DICGC has so far collected a crore insurance fund of 93,750, covering 92 per cent. of bank accounts in full. The company’s website also mentions that Goa-based Mapusa Urban Co-operative Bank is also ready for liquidation in April, but is not aware of the size of its deposit coverage.

With the cancellation of a license and the commencement of a liquidation proceeding, the process of paying the depositors of CKP Co-operative Bank Ltd., Mumbai, under the DICGC Act, 1961 will be initiated. Upon liquidation, any depositor is entitled to repayment of his / her deposits up to a monetary ceiling of? 5,00,000 / – (Rupees Five lakh only) from Deposit Insurance and Credit Guarantee Corporation (DICGC) as per. Usual terms and conditions, the RBI said in its announcement.

Reserve Bank canceled the license for CKP Co-operative Bank, as even their financial position after six years is very negative and unsustainable. “There is no concrete resuscitation plan or proposal for merger with another bank. Credible commitment to resuscitation from management is not visible,” the RBI said in a release.

According to the bank’s website, the bank had deposits worth Rs 435 crore in November 2019 and a customer base of approx. 1.3 lakh. It is estimated that over 1000 depositors who have deposits in excess of the Rs 5 lakh threshold may be at a loss. The bank is expecting some rescue from Maharashtra government through capital infusion supported by Madhavpura Co-operative Bank.

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