Bank License: Action has already been taken against many banks for not following the banking rules by the Reserve Bank of India (RBI). In the financial year that ended on March 31, the license of eight banks was canceled by the RBI.
Apart from this, on Monday (January 24) also, the central bank had imposed heavy penalties on four banks. In this sequence, RBI has now canceled the banking license of Kerala-based Adoor Co-operative Urban Bank. It has been allowed to work as a non-banking institution (NBFC) by the Central Bank.
Notification effective from April 24, 2023
According to the notification issued by RBI, the cancellation of the bank’s license has become effective from the close of business on April 24, 2023. On behalf of the Reserve Bank, it was said that Adoor Co-operative Urban Bank Limited was given a banking license on January 3, 1987 for banking business in India under the Banking Regulation Act. The notification of cancellation of the bank’s license has become effective from the close of business on April 24, 2023.
Bank will work like NBFC
In the notification issued by RBI, the bank has been asked to stop operating banking activities with immediate effect. According to RBI, the major difference between a bank and an NBFC is that a bank is an institution authorized by the government to provide banking services to the people. At the same time, NBFC is a company providing banking services to people without a bank license.
Earlier, the Reserve Bank (RBI) has canceled the license of 8 banks in the financial year ended on 31 March. Adoor Co-operative Urban Bank is the first case of cancellation of license in the new financial year. In the information given by RBI, it was told that the licenses of eight co-operative banks have been canceled in the financial year 2022-23 ending on 31 March. Reserve Bank has also imposed penalty 114 times on these banks for not following the rules.
What will happen to the customers’ money?
Account holders whose money is deposited in Adoor Co-operative Urban Bank will get the benefit of insurance cover on deposits up to Rs 5 lakh. This insurance is available from the Insurance and Credit Guarantee Corporation (DICGC). DICGC is a subsidiary of the Reserve Bank, which provides financial security to the customers of the Co-operative Bank. Customers having deposits of Rs 5 lakh or less with Adoor Co-operative Urban Bank will get full claim from DICGC. But such customers who have more than Rs 5 lakh deposited in their account, they will not be able to get the full amount.
