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Suspended Mapusa Cooperative Bank gets Investor, Forum of Depositors file Appeal to revoke Cancellation of Licence.

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  • The Forum of Depositors and Shareholders of MUCB has filed an Appeal before the Appellate Authority – Joint Secretary, Union Ministry of Finance and moved to the Court for Justice. 
  •  Dhanvarsha Group has approached the MUCB with a proposal to invest in it, and an application for prior approval has been preferred before the RBI.

Panji (Goa), February 10, 2021

Representing the interests of over two lakhs members and executing revival plan proposed by investors, Forum of Depositors and Shareholders of Mapusa Urban Cooperative Bank (MUCB) of Goa Ltd has filed an appeal before the Appellate Authority – Joint Secretary, Union Ministry of Finance, under the Banking Regulation Act – 1949 to revoke the cancellation of licence of the bank by the RBI in April 2020. In its appeal, the Forum urged the Tribunal to grant relief by granting an immediate stay on the order of cancelling the license of the RBI. The Depositors and stakeholders also urged the Authority to direct the liquidator to withhold the sale of the properties pending in the disposal of this Appeal. 

The Forum said that the proposed investment through private placement and other modes would be in jeopardy if the relief is not given to them instantly. In the Appeal, the Forum has made General Manager, RBI, a respondent who had ordered cancelled the license granted to the MUCB to carry on banking business on April 16, 2020. 

The MUCB Goa Ltd. was registered as a Co-op. Society on 9th December 1965. The Reserve Bank of India granted a license for conducting banking business in India on 1st October 1987. Since 1987-2020 the bank has been conducting banking business while having 24 branches with more than 2,80,000 Account holders. In 2014, based on the findings of an inspection conducted on 31.03.2014, it was allegedly revealed that the deposit erosion of the bank was at 6.1%. Therefore on the recommendations of Central TAFCUB, All-inclusive Directions (AID) were imposed on the Bank in July 2015. 

Meanwhile, the bank presented its case strongly, but no relief was given. Thereafter, a financial assessment for Financial Year 2018-2019 was conducted. On the financial audits and assessments, the RBI alleging deterioration of financial condition finally cancelled the license. The RBI has also alleged violations of various conditions laid down in the All-Inclusive Directions. Moreover, a Liquidator has been appointed. The Liquidator has issued a public notice and scheduled an auction for the sale of the properties belonging to the Bank and has invited bids on or before 21st January 2022. 

In its appeal, the Forum has also expressed apprehensions that there is a high possibility that the properties shall be sold at throwaway prices, and the same shall be detrimental to the interest of depositors and the shareholders. “It is therefore of utmost urgency that the Appeal be heard and a stay is obtained on the said auction and sale of properties of the bank,” it said. 

The investors have shown interest in MUCB due to new provisions. With the prior approval of the Reserve Bank, a cooperative bank may issue, by way of public issue or private placement, equity shares or preference shares or special shares, on face value or at a premium. Now, a cooperative bank can also get funds through unsecured debentures or bonds or other like securities with an initial or original maturity of not less than ten years to any member of such cooperative bank or any other person residing within its area of operation.

Given these amendments, it is evident that the Bank is now empowered under the Act to issue equity shares either by way of public issue or by way of a private placement. Dhanvarsha Group has approached the MUCB with a proposal to invest in it, and an application for prior approval has been preferred before the RBI. 

“It is most submitted that since the primary reason for cancellation of the license to conduct the business of banking in the instant case was financial deterioration, the said private placement agreement shall enable the bank to raise capital and thereby resume its business. In the event the license granted to the bank is not revived, the same shall cause grave prejudice not only to the employees of the bank but also to numerous depositors having their accounts with the bank,” the forum said in its appeal. 

The MUCB intends to repay all the debts and outgoings to its creditors and depositors. The same is possible only in the event the license of the bank is revived, the forum said, adding that it undertakes and guarantees that dues payable to all creditors irrespective of the value involved shall be paid in a specific period.

Along with this appeal, the Forum has also moved to the Court to seek relief so that the Bank can be revived with the infusion of funds by investors like Dhanvarsha Group. 

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