RBI Cancels License of Durga Co-operative Urban Bank, Halting All Customer Transactions

The Reserve Bank of India (RBI) recently canceled the license of The Durga Co-operative Urban Bank, based in Vijayawada, Andhra Pradesh. The license was revoked due to insufficient capital and a lack of viable earning prospects. Effective from the close of business on November 12, 2024, the bank ceased all banking operations. RBI has requested the Cooperative Commissioner of Andhra Pradesh and the Registrar of Cooperative Societies to issue an official closure order and appoint a liquidator.

Deposit Insurance for Customers

RBI stated that 95.8% of the bank's depositors are covered by the Deposit Insurance and Credit Guarantee Corporation (DICGC), meaning these customers are eligible to receive up to ₹5 lakh from DICGC as an insurance claim on their deposits. According to the bank’s data, DICGC has already disbursed ₹9.84 crore to depositors with insured deposits as of August 31, 2024.

Why the License Was Canceled

The Durga Co-operative Urban Bank's license was revoked because it lacked the capital needed to operate sustainably and could not meet the requirements of the Banking Regulation Act, 1949. The RBI stated that the bank’s current financial state meant it could not ensure full payments to depositors, and continuing operations would not be in the best interest of account holders.

Impact on Depositors

DICGC provides deposit insurance for amounts up to ₹5 lakh per depositor. Therefore, account holders with deposits within this limit will receive their money through DICGC insurance. However, those with deposits exceeding ₹5 lakh may incur losses, as the additional amount is not covered under DICGC's insurance cap. This policy applies to all types of deposit accounts within insured banks.