RBI Cancels Licence of Laxmi Co-Operative Bank, Allows Depositors to Withdraw up to Rs 5 Lakh

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The Reserve Bank of India on Thursday cancelled the licence of Maharashtra-based Laxmi Co-operative bank, saying that the lender does not have adequate capital and earning prospects. While cancelling the licence, the RBI also announced that on liquidation, all depositors of Laxmi Co-operative bank will be entitled to receive deposit insurance claim amount of his or her deposits up to a monetary ceiling of Rs 5 lakh. As a consequence of the cancellation of licence, the Laxmi Co-operative Bank will not be able to conduct any activities related to banking, the RBI further said in its circular.

“Today, the Reserve Bank of India (RBI), vide order dated September 14, 2022, has cancelled the licence of “The Laxmi Co-operative Bank Limited, Solapur, Maharashtra”. Consequently, the bank ceases to carry on banking business, with effect from the close of business on September 22, 2022. The Commissioner for Cooperation and Registrar of Cooperative Societies, Maharashtra has also been requested to issue an order for winding up the bank and appoint a liquidator for the bank,” said the RBI in a circular dated September 22.

The RBI cited five reasons on why it cancelled the bank’s licence. The central bank said that 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,” it said.

The RBI further said that Laxmi Co-operative 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”. It added that if the bank continues to carry on its operations even after this, it will be “prejudicial to the interests of its depositors”.

“Public interest would be adversely affected if the bank is allowed to carry on its banking business any further,” said the RBI.

As mentioned above, on liquidation of the bank, every depositor of the bank would 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.

The Laxmi Co-operative Bank Limited, Solapur, Maharashtra, has also been prohibited from carrying out any operations related to banking with immediate effect, as a consequence of the cancellation of its licence. This includes, among others, acceptance of deposits and repayment of deposits as defined in Section 5(b) read with Section 56 of the Banking Regulation Act, 1949.

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