RBI Cancels Licence Of Maharashtra-Based Laxmi Co-Operative Bank; Depositors Can Claim Upto Rs 5 Lakh

The Reserve Bank of India (RBI) has cancelled the licence of Maharashtra-based The Laxmi Co-operative Bank Limited citing weak financials. After this move, the co-operative bank ceases to carry on banking business, with effect from the close of business on Thursday (September 22, 2022), the RBI said in a release.

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, the RBI said.

According to the release, the central bank said that the bank 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.

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 RBI said.

According to the central bank, the bank with its present financial position would be unable to pay its present depositors in full, and public interest would be adversely affected if the bank is allowed to carry on its banking business any further.

The Laxmi Co-operative Bank is now prohibited from conducting the business of ‘banking’ which includes, among other things, acceptance of deposits and repayment of deposits with immediate effect.

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 only from 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. As on September 13, DICGC has already paid Rs 193.68 crore of the total insured deposits under the DICGC Act, 1961 based on the willingness received from the concerned depositors of the bank.