The Reserve Bank of India (RBI) says the Maharashtra registrar of cooperative societies (RCS) has appointed a liquidator for winding up affairs of Pune-based Rupee Co-operative Bank Ltd (Rupee Bank). This follows the dismissal of an appeal filed by Rupee Bank before the appellate authority (AA) of RBI.
On 10 August 2022, RBI cancelled the banking licence of Rupee Bank. However, Rupee Bank and Rupee Sangharsh Samiti, an association of depositors, approached the Bombay High Court (HC) against the RBI order. In September, the HC suspended the operation of RBI's order.
A single-judge bench of justice Sandeep K Shinde said that "pending appeal before the appellate authority, operation of the 8 August 2022 order shall remain suspended and the appellate authority shall dispose of the appeal positively on 17th October in accordance with law."
Subsequently, the matter reached the Supreme Court through a special leave petition (SLP). The apex court directed that the order of stay granted by Bombay HC stand restricted to the period up to and inclusive of 31 October 2022.
In a release, RBI says, "...the Appellate Authority, vide order dated 31 October 2022, has dismissed the appeal filed by the Rupee Co-operative Bank against the cancellation order dated 8 August 2022. Consequently, RCS, Maharashtra, in exercise of power conferred under Maharashtra Co-operative Societies Act, 1960, has appointed the liquidator, vide order dated October 31, 2022, for winding up of affairs of Rupee Co-operative Bank."
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 from Deposit Insurance and Credit Guarantee Corporation (DICGC) subject to the provisions of DICGC Act, 1961.
As per the data submitted by Rupee Bank, more than 99% of the depositors are entitled to receive full amount of their deposits from DICGC. As on 18 May 2022, DICGC has already paid Rs700.44 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.
Although reduced over the years, in June 2022, Rupee Bank had an accumulated loss of around Rs625 crore, and had around Rs823 crore in liquidity.
RCB had submitted various options for resolution of the Bank which include an exploratory proposal for merger. The administrator of the Bank, Sudhir Pandit, had said last year that RBI had given an undertaking in the Bombay High Court to take an appropriate decision before 31 December 2022 with respect to the resolution of the Bank.
Saraswat Cooperative Bank, which had submitted its proposal in January 2022, had subsequently raised queries about the loss of business it would face as around Rs700 crore has been paid to RCB account holders under the directive of the deposit insurance and credit guarantee corporation (DICGC).
When Saraswat Cooperative Bank submitted its proposal, the DICGC had directed RCB to start payment of deposits up to Rs5 lakh into accounts held then in Bank of Baroda. The Corporation had asked RCB to collect willingness forms from account-holders. Subsequently, 64,024 people had applied and the Corporation sanctioned payouts worth Rs700 crore. Interestingly, RBI had given in-principle approval to the merger proposal 45 days after it was submitted. But when the payout was given before the in-principle approval, Saraswat Cooperative Bank had raised questions about the viability of the merger in May 2022. (Read: RBI Cancels the Licence of Rupee Co-operative Bank Pune