The Reserve Bank of India (RBI) on Thursday cancelled the licence of Maharashtra’s Laxmi Co-operative Bank Limited, which cited the Solapur-based lender’s lack of sufficient capital, bleak future earnings prospects, and regulatory violations as reasons. The order will be effective from today onward.
“The Laxmi Co-operative Bank Limited, Solapur, Maharashtra is prohibited from conducting the business of ‘banking’ which includes, among other things, acceptance of deposits and repayment of deposits as defined in Section 5(b) read with Section 56 of the Banking Regulation Act, 1949 with immediate effect,” the RBI in its press release said.
RBI Listed Reasons For The Cancellation:
The bank lacks sufficient capital and earning prospects. 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.
The bank has 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;
The continuance of the bank is prejudicial to the interests of its depositors;
The bank with its present financial position would be unable to pay its present depositors in full; and
The public interest would be adversely affected if the bank is allowed to carry on its banking business any further.
Meanwhile, Reserve Bank also requested the Commissioner for Cooperation and Registrar of Cooperative Societies, Maharashtra to issue an order for winding up the bank and appoint a liquidator for the bank.
On liquidation, every depositor would be entitled to receive deposit insurance claim amount of his/her deposits up to a monetary ceiling of Rs 5 Lakh from Deposit Insurance and Credit Guarantee Corporation (DICGC) subject to the provisions of DICGC Act, 1961, RBI stated further.
About 99 per cent of depositors are eligible to collect the full value of their deposits from DICGC, Reserve Bank of India, citing data provided by the bank.