Bank customers alert! RBI CANCELS LICENCE of this bank over inadequate capital—says this about DEPOSITORS

In a big development, the Reserve Bank of India (RBI) has cancelled the licence of a bank for not having have adequate capital and earning prospects. This was revealed by the RBI in a statement on late Monday.  

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"Today, the Reserve Bank of India (RBI) has, vide order dated May 28, 2021 cancelled the licence of Shivajirao Bhosale Sahakari Bank Ltd., Pune, Maharashtra. Consequently, the bank ceases to carry on banking business, with effect from the close of business on May 31, 2021,"said the RBI. The 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. 

Why RBI cancelled licence of Shivajirao Bhosale Sahakari Bank Ltd? 

The Reserve Bank cited several reasons for cancelling the licence of the Maharashtra-based bank. Here are some of the reasons given by the RBI for cancelling  licence of this bank:  

1. 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,  

2. The bank has failed to comply with the requirements of section 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. The continuance of the bank is prejudicial to the interests of its depositors  

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

5. Public interest would be adversely affected if the bank is allowed to carry on its banking business any further. 

Meanwhile, after issuing the order, the RBI said Consequent to the cancellation of its licence Shivajirao Bhosale Sahakari Bank Ltd has been prohibited from conducting the business of ‘banking’ which includes 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. 

How will depositors be affected?   

The RBI said with the cancellation of licence and commencement of liquidation proceedings, the process of paying the depositors of Shivajirao Bhosale Sahakari Bank Ltd as per the DICGC Act, 1961, will be set in motion. As per the data submitted by the bank, more than 98% of the depositors will receive full amounts of their deposits from Deposit Insurance and Credit Guarantee Corporation (DICGC). On liquidation, every depositor would be entitled to receive deposit insurance claim amount of his/her deposits up to a monetary ceiling of ₹5,00,000/- (Rupees Five lakh only) from the DICGC subject to the provisions of the DICGC Act, 1961.