The Reserve Bank of India (RBI) has taken a significant step by canceling the license of Ajanta Urban Co-operative Bank Limited located in Aurangabad, Maharashtra. The bank’s operations are set to cease from April 22. This marks the third such action taken by RBI in April 2025, as the central bank continues to enforce stringent measures in the banking sector. In addition to the license revocation, the Registrar of Co-operative Societies, Maharashtra has been asked to issue closure orders for the bank and appoint a liquidator.
Why Did RBI Take Action Against Ajanta Urban Co-operative Bank?
RBI’s decision to shut down Ajanta Urban Co-operative Bank follows a series of violations under the Banking Regulation Act of 1949. According to the RBI, the bank has been found lacking in sufficient capital and does not have any prospects of generating earnings. The bank also failed to meet the regulatory requirements specified under Sections 56, 22(3)(B), 22(3)(D), and 22(3)(E) of the Banking Regulation Act. If the bank were allowed to continue its operations, it could pose a significant risk to the interests of depositors and public trust.
RBI further emphasized that allowing the bank to keep functioning under such circumstances would have a detrimental impact on the public, especially its customers who rely on the bank for financial services.
Impact on Customers After License Revocation
With the cancellation of its license, Ajanta Urban Co-operative Bank will no longer be permitted to accept deposits, repay existing deposits, or carry out any other banking activities. Customers will be unable to withdraw or deposit funds, and loan disbursements will also be halted.
However, there is a measure of protection for the bank’s depositors under the DICGC Act of 1961. The Deposit Insurance and Credit Guarantee Corporation (DICGC) ensures that depositors will be compensated for their lost funds up to a limit of ₹5 lakh. This coverage applies to both principal and interest accumulated on the deposits up to the insured limit.
Over 91% of Customers to Receive Full Compensation
As per the data provided by the bank, DICGC has already paid a total of ₹275.22 crore to depositors as of April 3, 2025. This represents the insured portion of the deposits. 91.55% of the customers will receive the full amount of their deposits, thanks to this compensation scheme.
While this measure provides some relief, it’s important to note that non-insured depositors or amounts above the ₹5 lakh limit will not be covered, potentially leading to significant losses for some customers.
Conclusion
The closure of Ajanta Urban Co-operative Bank Limited highlights the ongoing regulatory scrutiny within India’s banking sector. While the depositors will be somewhat protected under the DICGC scheme, the shutdown serves as a cautionary reminder about the importance of banking regulations and the need for financial institutions to maintain healthy operational practices. With multiple such actions by RBI in recent times, it’s clear that the central bank is committed to ensuring financial stability and protecting public interests.
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