RBI Cancels Licence of Karnataka’s Hiriyur Urban Co-Op Bank

Current Context: The Reserve Bank of India (RBI) has indeed cancelled the licence of The Hiriyur Urban Co-operative Bank Ltd., Hiriyur, Karnataka.

• The bank ceased to carry on banking business from the close of business on January 12, 2024.
• The RBI cancelled the licence due to the following reasons:
• The bank did not have adequate capital and earning prospects, hence it did not comply with the provisions of Section 11 (1) and Section 22 (3) (d) read with Section 56 of the Banking Regulation Act, 1949.
• The bank failed to comply with the requirements of Sections 22 (3) (a), 22 (3) (b), 22 (3) ©, 22 (3) (d) and 22 (3) (e) read with Section 56 of the Banking Regulation Act, 1949.
• The continuance of the bank was prejudicial to the interests of its depositors.
• The bank, with its present financial position, would be unable to pay its present depositors in full.
• Public interest would be adversely affected if the bank were allowed to carry on its banking business any further.
• Consequently, the bank is now prohibited from conducting the business of ‘banking’, which includes, among other things, acceptance of deposits and repayment of deposits.

Question:

Q.1 Why did the RBI cancel the licence of The Hiriyur Urban Co-operative Bank Ltd.?
a. The bank had too much capital
b. The bank did not have adequate capital and earning prospects
c. The bank was making too much profit
d. The bank was not located in Karnataka