• The RBI, under sub-section (1) of Section 35 A of the Banking Regulation Act, 1949 has extended the Directions ( Cancellation of License) till January 16, 2023
• Agreement for Rs 230 crore Private Placement has been executed as per Section 12 of the Banking Regulations Amendment Act 2020 in July 2022
Mumbai, October 15, 2022
Following an extension from the Banking Regulator Reserve Bank of India (RBI) for three months, the City Cooperative Bank, Mumbai has pulled up its socks to strengthen its financial position to revive it with the support of Dhanvarsha Group which has signed an agreement for Rs 230 crore Private Placement has been executed as per Section 12 of the Banking Regulations Amendment Act 2020 in July 2022. The Bank is under All Inclusive Directions (AID) imposed by the RBI as per Section 35(a) Banking Regulations Act. 1949. Under AID, the RBI restricts the bank from discharging its liabilities except as permitted by the central bank.
The RBI, under sub-section (1) of Section 35 A of the Banking Regulation Act, 1949 has extended the Directions Cancellation of License) till January 16, 2023.
“Directions under Section 35 A read with Section 56 of the Banking Regulation Act, 1949 – The City Co-operative Bank Limited, Mumbai - Extension of period The Reserve Bank of India, vide directive DCBS.CO.BSD-I/D-5/12.22.039/2017- 18 dated April 17, 2018, had placed The City Co-operative Bank Ltd, Mumbai under Directions from the close of business on April 17, 2018. The validity of the directions was extended from time to time, the last being up to October 16, 2022,” the RBI said in its Press Release.
“It is hereby notified … the Reserve bank of India, in the exercise of powers vested in it under sub-section (1) of Section 35 A read with Section 56 of the Banking Regulation Act, 1949, hereby directs that the aforesaid Directions shall continue to apply to the bank till January 16, 2023, as per the directive DOR.MON.D-35/12.22.039/2022-23 dated October 13, 2022,” it said.
“The City Cooperative Bank, Mumbai has entered into a Private Placement Agreement with Dhanvarsha Group which has offered to infuse Rs 230 crore for the revival. We, in the last Quarter, have made a robust recovery of loans and NPAs and in this Quarter (October-December) also we are making all efforts for good recovery to strengthen our financial position. We are treading on a revival path with an infusion of funds from the Dhanvarsha Group. We would greatly appreciate the RBI’s out-of-the-box thinking and the support of Maharashtra Cooperative Ministry for considering our revival proposal,” said Mr Anandrao Adsul (Ex-MP), Chairman, the City Cooperative Bank, Mumbai. .
Dhanvarsha Group, a leading business conglomerate engaged in several sectors including finance and banking, has offered a comprehensive revival package for the City Cooperative Bank Ltd., Mumbai and entered into an Agreement for Private Placement has executed pertaining to an Investment of Rs.230 crore into the bank as per Section 12 of the Banking Regulations Amendment Act 2020. Dhanvarsh Group is all set to initially infuse Rs 230 crore to meet the capital requirements of the Reserve Bank of India (RBI). The Agreement for Private Placement was signed on July 28y 2022. The proposal for revival was submitted to the RBI.
It is reliably learnt that the Banking Regulator has been considering a few revival packages seriously and had sought some mandatory documents including the financials of the Dhanvarsha Group which had duly submitted the asked documents last month.
In a letter and proposal to the Union Finance Minister, Maharashtra Cooperative Ministry, and the RBI, Dhanvarsha Group has prayed that the All-Inclusive Directions imposed on The City Co-operative Bank Ltd., Mumbai be revoked and its proposal should be considered seriously in the larger interest of the Depositors of the Bank.
The Bankers, investors, and experts strongly advocate that the RBI should go for out-of-the-box thinking to fulfil India’s dream of ‘One Cooperative Bank in Each District’, as envisioned by the Union Cooperation Minister Mr Amit Shah who was instrumental in amending the Banking Act 2020.
With recent (2020) amendments to the Banking Regulation Act, a cooperative bank may, with the prior approval of the Reserve Bank, issue, by way of public issue or private placement, equity shares or preference shares or special shares, on face value or at a premium.
“For the benefit of members/depositors and stakeholders, we are making all efforts to revive the Bank. It is encouraging that the Dhanvarsha Group has come forward with a robust revival plan. Now, with new provisions, a cooperative bank may, with the prior approval of the Reserve Bank, issue, by way of public issue or private placement, equity shares or preference shares or special shares, on face value or at a premium,” said Mr Arthur Rebello, CEO, The City Cooperative Bank.
The new laws allow a cooperative bank also to get funds through unsecured debentures or bonds or other securities with an initial or original maturity of not less than ten years, to any member of such a cooperative bank or any other person residing within its area of operation.
“The RBI needs to focus on rational policies in the interest of depositors and stakeholders and should take landmark decisions based on the amended Banking Act 2020 for the revival of the sector with the private placement. The sector should be opened for private investors,” said Dhanvarsha Group Chairman Anshumman Joshi, who is known as a saviour of cooperative banking in India.
According to experts in the sector, the RBI should take a path-breaking landmark decision for the revival of the cooperative banks in the interest of depositors and the cooperative sector as cancellation of the licenses does not offer any solution to the depositors. In fact, it is the death of the Cooperative Movement in the country. The RBI’s initiatives and out-of-the-box thinking can transform the way funding or investment is done in the sector and fulfil the dreams of Union Cooperation Minister Amit Shah, who is very keen to provide fresh momentum to the sector.