Liquidation veil over weak UCBs

The Reserve Bank of India RBI made it clear today that the weak urban cooperative banks UCBs will be liquidated if the banks8217; financial condition worsens and managements start siphoning off funds from the banks.

8216;8216;It8217;s a sin for a regulator to allow an insolvent bank to continue and raise deposits from the small depositors. We are going to sign a memorandum of agreement with the State governments so that we can liquidate weak banks in so that depositors should not lose money,8217;8217; the RBI governor, Y V Reddy said here today.

8216;8216;The moment a weak UCB reaches tipping points and the management starts siphoning off funds, the RBI will step in and take strict action,8217;8217; he said.8217;Reddy said it would closely monitor operations of these financial entities, which are effective instruments for credit delivery to the poorer section of the economy.