License Of This Co-operative Bank Cancelled; Customer Can Only Get Rs 5 lakh Back

By Shreya Bose Last updated Sep 24, 2022

The Reserve Bank of India notified on Thursday that it canceled the license of Maharashtra-based Laxmi Co-operative bank, saying that the lender does not have adequate capital and earning prospects.

Members and non-members of such entities are advised by the RBI to be cautious of cooperative entities using the term 'Bank' in their names. — Members and non-members of such entities are advised by the RBI to be cautious of cooperative entities using the term ‘Bank’ in their names.

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What comes next?

Consequently, the bank may no longer carry on banking business, with effect from the close of business on September 22, 2022.

In the next step, the Commissioner for Cooperation and Registrar of Cooperative Societies, Maharashtra will issue an order for winding up the bank and appoint a liquidator for the bank.

It cited the following reasons behind the cancellation.

1.

First, the lender does not have adequate capital and earning prospects.

As such, it does not comply with the provisions of Section 11(1) and Section 22 (3) (d) read with Section 56 of the Banking Regulation Act, 1949.

2.

Second, the bank failed to comply with the requirements of Sections 22(3) (a), 22 (3) (b), 22(3)(c), 22(3) (d) and 22(3)(e) read with Section 56 of the Banking Regulation Act, 1949.

3.

Third, if the bank continues to carry on its operations even after this, it will be “prejudicial to the interests of its depositors”.

4.

Fourth, The bank with its present financial position would be unable to pay its present depositors in full.

5.

Fifth, Public interest would be adversely affected if the bank is allowed to carry on its banking business.

Deposit insurance

The apex bank further announced that on liquidation, all depositors of the bank will be entitled to receive deposit insurance claim amount of up to Rs 5 lakh each from the Deposit Insurance and Credit Guarantee Corporation (DICGC) subject to the provisions of DICGC Act, 1961.

“As per the data submitted by the bank, about 99 per cent of the depositors are entitled to receive full amount of their deposits from DICGC,” said the central bank.

As of September 13, 2022, DICGC has already paid Rs193.68 crore of the total insured deposits under the provisions of Section 18A of the DICGC Act, 1961 based on the willingness received from the concerned depositors of the bank, the RBI said.