The Reserve Bank of India revoked the licenses of two cooperative banks, namely Hiriyur Urban Cooperative Bank and Shree Mahalaxmi Mercantile Cooperative Bank, on Friday.
RBI directed the registrar of cooperative societies to issue an order for winding up and appoint a liquidator.
According to information provided by Shree Mahalaxmi Mercantile Cooperative Bank, 99.36% of its depositors are eligible to receive the full amount of their deposits from DICGC. As of September 30, 2023, DICGC has approved Rs 24.58 crore for the total insured deposits under Section 18A of the DICGC Act, 1961, based on the willingness expressed by the respective depositors.
Similarly, for the Hiriyur Urban Cooperative Bank in Karnataka, 99.93% of depositors have the right to receive the full amount of their deposits from DICGC. As of September 30, 2023, DICGC has already disbursed Rs 224.53 lakh for the total insured deposits under Section 18A of the DICGC Act, 1961, based on the expressed willingness of the concerned depositors.
The RBI cancelled the licenses of these banks due to insufficient capital and poor earning prospects, violating the provisions of Section 11(1) and Section 22 (3) (d) in conjunction with Section 56 of the Banking Regulation Act, 1949. Additionally, the banks 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.
The RBI justified its decision, stating that the continuation of these banks is detrimental to the interests of their depositors, and given their current financial position, they would be unable to fully reimburse their depositors. Allowing these banks to continue their banking business further would adversely affect public interest.