Observing that it is the duty of the Reserve Bank of India to act as the strongest watchdog into the affairs of a bank and supervise if it is complying with banking licence, the Bombay High Court on Friday upheld the decision of the RBI to wind up the CKP Bank, which is the oldest urban cooperative bank. The HC noted that the RBI had given sufficient time to CKP bank to right the wrongs going in it but yet there was no improvement.
Notably, the RBI had in May last year ordered the Registrar of Cooperative Societies to wind up the CKP Bank, which has around eight branches of the bank across Mumbai and Thane districts.
While cancelling the bank’s licence, the RBI in a statement had said, “The financial position of the bank 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.”
The decision was taken after a thorough inspection for a brief period of time.
Aggrieved with the decision, the CKP bank had petitioned a division bench of Justices Ramesh Dhanuka and Virendra Bisht, seeking to quash the RBI’s decision.
The judges, having considered the contentions, noted, “It is the duty of the RBI to act as the strongest watchdog into the affairs of a bank having granted banking licence and to continuously supervise mandatorily whether the conditions for granting such banking licence have been complied with from time to time by such banks or not.”
“It is RBI’s duty to safeguard the public interest and more particularly the interest of depositors and members of such bank and to cancel the banking licence, if in spite of granting opportunity to take the necessary steps for complying with the Banking Regulation Act, such bank does not comply with the conditions and there would be no possibility of its revival,” the judges added further.
The judges noted that sufficient time was given by the RBI to CKP to revive its financial conditions and also to take steps to merge with some other cooperative banks.
“The CKP bank, however, did not take any steps to comply with those directions issued by the RBI giving ample opportunity under Section 22(3) of the Banking Regulation Act,” the bench said while upholding the RBI’s decision.
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