Failed CKP Co-operative Bank depositors among first beneficiaries of higher deposit cover

Mumbai: The depositors of the Mumbai-based failed CKP Co-operative Bank will be among the first beneficiaries of higher deposit insurance cover of Rs 5 lakh. The bank’s license was cancelled by the Reserve Bank last week and the government hiked the minimum deposit insurance cover from Rs 1 lakh to Rs 5 lakh in its budget announcement in February.

The bank which was under RBI’s administration since 2014, failed to come up with a satisfactory revival plan, after which the banking regulator cancelled its license. Majority of the bank’s depositors now get 100 per cent of their money back. “About 99.2% CKP Co-operative Bank depositors to get money back under deposit insurance” said RBI’s spokeperson, Yogesh Dayal in a tweet.

The Deposit Insurance and Credit Guarantee Corporation (DICGC) annual report for 2018-19 shows that while a total amount of Rs 296 crore was paid toward claims of 27 commercial banks since its inception in 1962, Rs 4,822 crore of claims were paid for 351 co-operative banks since these banks were eligible for deposit insurance in 1968. The DICGC has a Rs 93,750 crore insurance fund collected so far which covers 92 per cent of the bank accounts fully. The corporation website also mentions that Goa based- Mapusa Urban Co-operative Bank is also up for liquidation in April, but is not clear about the amount of deposit cover.

With the cancellation of licence and commencement of liquidation proceedings, the process of paying the depositors of The CKP Co-operative Bank Ltd., Mumbai, as per the DICGC Act, 1961 will be set in motion. On liquidation, every depositor is entitled to repayment of his/her deposits up to a monetary ceiling of ? 5,00,000/- (Rupees Five lakh only) from the Deposit Insurance and Credit Guarantee Corporation (DICGC) as per usual terms and conditions, RBI said in its announcement.

The Reserve Bank cancelled the license of CKP Co-operative bank as even after six years its financial position is highly adverse and unsustainable. “There is no concrete revival plan or proposal for merger with another bank. Credible commitment towards revival from the management is not visible” RBI said in a release.

According to the bank’s website, the bank had deposits worth Rs 435 crore as of November2019 and a customer base of around 1.3 lakh. It is estimated that over 1000 depositors who have deposits of over the Rs 5 lakh threshold may stand to lose. The bank is expecting some bail-out from the Maharashtra government through capital infusion, the way Madhavpura Co-operative Bank was supported.