A cooperative bank called CKP Co-op Bank has got instructions to shut shop. The Reserve Bank of India (RBI) has cancelled the license of this bank. After RBI orders all banking operations of CKP Co-op bank suspended.
However, RBI has allowed the Bank depositors to withdraw up to 5 Lakhs. But the bigger question that looms over the Bank. It is whether liquidity available to address the depositors saving security.
As per sources, the non-performing assets (NPA) of the Bank has crossed 95%. This is the main reason for RBI decision to shut the bank with immediate effect.
Very few people of Mumbai know about this CKP Co-op. it has operations in Mumbai and surrounding only. It has 8 branches in Mumbai and including two branches in the adjoining Thane district.
Due to the COVID_19 lockdown, the story did not get the attention of media. Neither depositors rushed to the bank and started protest about banks. Normally depositors rush to such ailing banks to withdraw their hard-earned earnings. Lack of popularity and Corona Virus must have been reasons why there are no crowds at the Bank.
Faith will dwindle in Co-Op Banks after the closure of CKP Co-Op Bank
The CKP Co-op Bank had a huge exposure to Small and Medium Enterprises. These firms largely belonged to the troubled Real Estate sector.
The Real Estate sector has been bleeding profusely for quite some time. Several Real Estate Companies have even closed operations due to a lack of demand in the market. Grim Economic conditions are the main reasons why consumers are refraining from property investment.
The large real estate companies are somehow surviving in these adverse conditions. The smaller ones could not handle the pressure and succumbed.
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There has been no immediate fraud reported for the bank in the public domain. But you never know if RBI has any information about foul play for lending etc.
It may be a collective failure of the Bank as well as a weak economic system that must have caused the closure too. But all this is just speculative at this point. Only once a full-fledged investigation is conducted will anybody be able to ascertain the real reasons of why the Bank has actually shut down.
