Imperial Urban Co-operative Bank: RBI takes big action, cancels the license of this bank, what will happen to the customers' money?

The Reserve Bank of India (RBI) monitors the operations of all the banks in the country. Whenever a bank ignores the rules and acts arbitrarily, the RBI can impose a fine on it. In this episode, the RBI on Friday informed about cancelling the license of Jalandhar-based Imperial Urban Co-operative Bank. This step was taken due to the bank not having sufficient capital and earning prospects.

The Registrar of Co-operative Societies of the Punjab Government has also been requested to issue an order to close the bank and appoint a liquidator for the bank. On liquidation, every depositor will be able to get up to Rs 5 lakh of his deposit from the Deposit Insurance and Credit Guarantee Corporation Act (DICGC). The RBI said that according to the bank's data, 97.79 percent of the depositors will be able to get their entire deposit amount from DICGC. DICGC has already paid Rs 5.41 crore in total insured deposits till January 31, 2025.

Why action was taken on the bank

Regarding the reasons for cancelling the license of Imperial Urban Co-operative Bank, RBI said that the continuation of the bank is not in the interest of its depositors and if the bank is allowed to continue banking business further, it will adversely affect the public interest. RBI said that due to its current financial position, the bank will be unable to pay its depositors.

Up to Rs 5, lakh is safe if the bank sinks.

The only relief available to the depositor in case of bank sinking or bankruptcy is the insurance cover provided by Deposit Insurance and Credit Guarantee Corporation i.e. DICGC. Insurance cover under DICGC is available up to Rs 5 lakh. No matter how much money is deposited in all your accounts in the same bank, you will get an insurance cover of only Rs 5 lakh. This amount includes both the principal and the interest amount. DICGC's deposit insurance covers all insured commercial banks including LAB, PB, SFB, RRB, and cooperative banks.

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