The Reserve Bank of India (RBI) has cancelled the licence of People’s Co-operative Bank Limited in Uttar Pradesh, the central bank said in a press statement on March 21. People’s Co-operative is the fourth such bank to face RBI action this year.

The bank ceased to carry out banking business, with effect from the close of business on March 21, 2022. In a release, the RBI said that the licence was cancelled as the bank didn’t have adequate capital and earning prospects, and it failed to comply with various sections of the Banking Regulation Act.

Also Read |RBI extends Rajeev Ahuja’s term as RBL Bank’s interim CEO for three months

“The Commissioner for Cooperation and Registrar of Cooperative Societies, Uttar Pradesh has also been requested to issue an order for winding up the bank and appoint a liquidator for the bank,” the RBI said.

The continuance of the bank is prejudicial to the interests of its depositors as its financial position wouldn’t allow the bank to pay the depositors in full. The public interest would be affected if the bank was allowed to carry on its business, the banking regulator added.

Also Read | How the US Federal Reserve’s rate hike impacts RBI policy: Explained

People’s Co-operative Bank was prohibited from conducting the business of “banking”, which includes acceptance and repayment of deposits, with immediate effect.

On, liquidation, every depositor with the bank would be entitled to receive deposit insurance claim amount of their deposits up to a monetary limit of Rs 5 lakh from the Deposit Insurance and Credit Guarantee Corporation (DICGC), as per the provisions of the DICGC Act, 1961, the RBI said.

Also Read | Government seeking to classify cryptocurrencies under GST law

“As per the data submitted by the bank, more than 99 per cent of the depositors are entitled to receive the full amount of their deposits from DICGC. As of February 14, 2022, DICGC has sanctioned Rs 6.97 crore of the total insured deposits under the provisions of Section 18A of the DICGC Act, 1961 based on the willingness received from the concerned depositors of the bank,” the release said.

Also Read | Indian bulk diesel purchasers rush to secure supplies from retail outlets

This is the fresh instance of the RBI action on weak cooperative banks this year. It has cancelled the licences of Sarjeraodada Naik Shirala Sahakari Bank, Independence Co-operative Bank and Mantha Urban Cooperative Bank. The three banks are based in Maharashtra.

The main reason for their closures was a weak capital position and earning prospects. According to the RBI, in all three cases, 99% of the depositors will get their money bank for DICGC. The clampdown on cooperative banks by the RBI has become a concern for depositors recently, though the banking regulator continues to warn customers against the risks involved.