The demand to raise deposit insurance limit of Rs 5 lakh has increased in the wake of recent scam in New India Cooperative Bank; Case of Depositors of Cuddalore And Villupuram DCCB AS well as Vaishali Shahari Vikas Co-operative Bank
FinTech BizNews Service
Mumbai, February 17, 2025: The government is actively considering a proposal to increase the deposit insurance ceiling of Rs 5 lakh. Once any decision is made, we will let you know, said Shri M. Nagaraju, Secretary, Department of Financial Services. He was speaking at the post-budget stakeholders’ interaction in Mumbai on Monday.
The demand to raise deposit insurance limit of Rs 5 lakh has increased in the wake of recent scam in New India Cooperative Bank.
No acceptance of fresh deposits by NICB
In exercise of the powers conferred under Section 36 AAA read with section 56 of the Banking Regulation Act, 1949 (As Applicable to Co-operative Societies), the Reserve Bank had on February 14, 2025 superseded the Board of Directors of New India Cooperative Bank Ltd., Mumbai, for a period of 12 months.
The Reserve Bank of India (RBI) vide Directive Ref. No. CO.DOS.SED.No.D-01/12-22-350/2024-2025 dated February 13, 2025, had issued certain Directions to New India Co-operative Bank Limited, Mumbai (“the bank”), whereby, as from the close of business on February 13, 2025, the bank shall not, without prior approval of RBI in writing, grant or renew any loans and advances, make any investment, incur any liability including borrowal of funds and acceptance of fresh deposits, disburse or agree to disburse any payment whether in discharge of its liabilities and obligations or otherwise, enter into any compromise or arrangement and sell, transfer or otherwise dispose of any of its properties or assets except as notified in the RBI Direction dated February 13, 2025, a copy of which is displayed on the bank's website / premises for perusal by interested members of the public. Considering the bank's present liquidity position, the bank has been directed not to allow withdrawal of any amount from savings bank or current accounts or any other account of a depositor but is allowed to set off loans against deposits subject to the conditions stated in the above RBI Directions.
Cancellation Of Licence Of Cuddalore And Villupuram DCCB
RBI had canceled on 6 Feb 2025 the licence granted to The Cuddalore and Villupuram District Central Co-operative Bank’s Employees Cooperative Bank Ltd., Cuddalore, Tamil Nadu and allowed it to function as non-banking institution.
Reserve Bank of India (RBI) issued a press release saying: “ RBI is satisfied to notify The Cuddalore and Villupuram District Central Co-operative Bank’s Employees Cooperative Bank Ltd., Cuddalore – 607001, Tamil Nadu as a non-banking institution under Section 36A(2) read with Section 56 of the Banking Regulation Act, 1949. Consequently, RBI has cancelled the licence dated March 21, 2000, granted to The Cuddalore and Villupuram District Central Co-operative Bank’s Employees Cooperative Bank Ltd., Cuddalore – 607001, Tamil Nadu to carry on banking business in India under Section 22 read with Section 56 of the Banking Regulation Act,1949, with effect from the close of business on February 6, 2025. This makes it obligatory on the part of The Cuddalore and Villupuram District Central Co-operative Bank’s Employees Cooperative Bank Ltd., Cuddalore – 607001, Tamil Nadu to stop conducting the business of ‘banking’ within the meaning of section 5(b) read with Section 56 of the Act ibid, including acceptance of deposits from non-members with immediate effect. Further, The Cuddalore and Villupuram District Central Co-operative Bank’s Employees Cooperative Bank Ltd., Cuddalore – 607001, Tamil Nadu shall ensure to repay unpaid and unclaimed deposits of non-members held by it, whenever demanded, even after being notified as a non-banking institution.”
Consequently, the registration of the bank with Deposit Insurance and Credit Guarantee Corporation (DICGC) stands cancelled with effect from February 06, 2025.
Cancellation Of Licence Of Vaishali Shahari Vikas Co-operative Bank
The Reserve Bank of India (RBI), vide order dated December 27, 2024, had cancelled the license of “The Vaishali Shahari Vikas Co-operative Bank Ltd., Hajipur, Dist. Vaishali”.
On liquidation, every depositor would be entitled to receive deposit insurance claim amount of his/her deposits up to a monetary ceiling of Rs5,00,000/- (Rupees five lakh only) from Deposit Insurance and Credit Guarantee Corporation (DICGC) subject to the provisions of DICGC Act, 1961. As per the data submitted by the bank, 98.47% of the depositors are entitled to receive full amount of their deposits from DICGC. As on December 05, 2024, DICGC has already paid Rs5832.80 lakh 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.
