RBI Cancels Laxmi Co-operative Bank's Licence
Moneylife Digital Team 23 September 2022
The Reserve Bank of India (RBI) on 22nd September announced that it has cancelled Solapur-based The Laxmi Co-operative Bank Limited, citing the lender lacks adequate capital and earning prospects.
 
The Bank ceases to carry on banking business, with effect from the close of business on 22 September 2022, RBI said in a statement. Furthermore, RBI requested Maharashtra's commissioner for cooperation and registrar of cooperative societies to issue an order for winding up the Bank and appoint a liquidator for the Bank.
 
"Today, the Reserve Bank of India (RBI), vide order dated 14 September 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 RBI statement said.
 
Mentioning the reasons for cancelling the licence, RBI said the bank does not have adequate capital and earning prospects. It also cited that 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.
 
RBI added that the Bank, with its present financial position, would be unable to pay its present depositors in full and public interest would be adversely affected.
 
With this cancellation, The Laxmi Co-operative Bank Limited will not be able to from conducting the business of ‘banking’ which includes, among other things, acceptance of deposits and repayment of deposits.
 
However, to ensure that customers' money is safe, every depositor would be entitled to receive deposit insurance claim amount of his/her deposits up to a monetary ceiling of Rs5,00,000 from Deposit Insurance and Credit Guarantee Corporation (DICGC) subject to the provisions of DICGC Act, 1961. As per the data submitted by the Bank, 99% of the depositors are entitled to receive the full amount of their deposits from DICGC. 
 
The crackdown on cooperative banks has gathered momentum over the past one year. In 2020, the Union government vested more powers with RBI to supervise cooperative banks and, since, then the bank regulator has continued to tighten the leash on corrupt and mismanaged lenders, routinely imposing penalties for deviating from regulatory norms. Before the 2020 amendment, RBI had limited powers to regulate cooperative banks, restricting its ability to take timely corrective action. While the amendment came into force for urban cooperative banks with retrospective effect from 29 June 2020, for state cooperative banks and district central cooperative banks, it was effective from 1 April 2021. Cooperative banks have historically been vulnerable to political influence, lack of adherence to proper safeguards and charges of mismanagement and Moneylife has consistently highlighted these issues in the past. 
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