Why Did RBI Cancel the Licence of Karwar Urban Co-operative Bank?
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Synopsis
In a significant move, the Reserve Bank of India has cancelled the licence of The Karwar Urban Co-operative Bank due to financial instability. This decision impacts numerous depositors and raises questions about the future of the bank’s operations. Discover the implications and the steps that will follow this crucial announcement.
Key Takeaways
- The RBI has revoked the licence of Karwar Urban Co-operative Bank due to financial instability.
- The bank will cease operations from July 23, 2025.
- Depositors are entitled to insurance claims from DICGC.
- 92.90% of depositors can expect to receive their full deposits.
- The move is aimed at protecting public interest.
Mumbai, July 23 (NationPress) The Reserve Bank of India (RBI) revealed on Wednesday that it has revoked the licence of The Karwar Urban Co-operative Bank Ltd located in Karnataka due to insufficient capital and earning potential.
As a result, the bank will no longer engage in banking operations, effective from the end of business on July 23, 2025.
According to the RBI directive, The Karwar Urban Co-operative Bank Ltd., Karwar, is barred from performing ‘banking’ activities, which includes, among other things, the acceptance and repayment of deposits with immediate effect.
The Registrar of Cooperative Societies, Karnataka, has also been instructed to initiate winding up proceedings for the bank and appoint a liquidator, as stated in the RBI announcement.
The RBI indicated that the licence was revoked because the Karwar Urban Co-operative Bank lacks sufficient capital and earning potential, failing to meet the standards set by the Banking Regulation Act.
Continuing the bank's operations poses a risk to the interests of its depositors, according to the RBI.
“Given its current financial status, the bank would not be able to fully reimburse its depositors; allowing it to continue operating would negatively impact public interest,” the RBI statement elaborated.
Upon liquidation, each depositor will be eligible to receive an insurance claim for their deposits up to a limit of Rs 5,00,000 from the Deposit Insurance and Credit Guarantee Corporation (DICGC), in accordance with the DICGC Act, 1961.
According to the bank's data, 92.90% of depositors are set to receive the complete amount of their deposits from DICGC. As of June 30, 2025, DICGC has disbursed Rs 37.79 crore of the total insured deposits as per Section 18A of the DICGC Act, 1961, based on the requests from the bank's depositors, the RBI statement concluded.
Point of View
It's crucial to highlight that the RBI's decision to cancel the licence of The Karwar Urban Co-operative Bank serves as a protective measure for depositors. This action underscores the importance of maintaining robust financial practices within banking institutions to safeguard public interest.
NationPress
23/07/2025
Frequently Asked Questions
Why was the licence of Karwar Urban Co-operative Bank cancelled?
The licence was cancelled due to the bank's inadequate capital and earning prospects, which did not comply with the Banking Regulation Act.
What happens to the depositors after the bank's licence cancellation?
Upon liquidation, depositors will be eligible for insurance claims up to Rs 5,00,000 from the DICGC.
What percentage of depositors will receive their full deposits?
According to the bank's data, approximately 92.90% of depositors are entitled to receive the full amount of their deposits.
When will the bank cease operations?
The bank will stop all banking operations effective from the close of business on July 23, 2025.
What actions will be taken against the bank?
The Registrar of Cooperative Societies, Karnataka, has been requested to wind up the bank and appoint a liquidator.
