Recorded RBI impact
License cancellation
License cancellation · Fresh imposition
Published by RBI
13 Aug 2021
Case Brief
The Reserve Bank of India cancelled the licence of Karnala Nagari Sahakari Bank Ltd., Panvel (District - Raigad), Maharashtra, by order dated August 09, 2021. RBI said the bank lacked adequate capital and earning prospects, did not comply with the relevant licensing provisions of the Banking Regulation Act, 1949, and had failed several requirements under section 22(3) read with section 56. RBI also noted that the bank's continuance would be prejudicial to depositors, that it would be unable to pay depositors in full, and that public interest would be adversely affected. Following the cancellation, the bank is prohibited from conducting banking business with immediate effect, and the Commissioner for Cooperation and Registrar of Cooperative Societies, Maharashtra has been requested to initiate winding up and appoint a liquidator.
Why RBI Acted
RBI cancelled the licence of Karnala Nagari Sahakari Bank Ltd., Panvel (District - Raigad), Maharashtra by order dated August 09, 2021. The stated grounds were that the bank did not have adequate capital and earning prospects, did not comply with section 11(1) and section 22(3)(d) read with section 56 of the Banking Regulation Act, 1949, and had failed to comply with sections 22(3)(a), 22(3)(b), 22(3)(c), 22(3)(d) and 22(3)(e) read with section 56. RBI further recorded that the continuance of the bank would be prejudicial to the interests of its depositors, the bank would be unable to pay present depositors in full, and public interest would be adversely affected if it continued banking business.
Operating Impact
The bank can no longer accept or repay deposits or otherwise conduct banking business. Liquidation proceedings will follow, and depositor claims will move into the DICGC payout process, with eligible depositors covered up to the statutory insurance ceiling of Rs 5 lakh.
Regulatory Basis
- Section 11(1) of the Banking Regulation Act, 1949
- Section 22(3)(d) read with Section 56 of the Banking Regulation Act, 1949
- Section 22(3)(a) read with Section 56 of the Banking Regulation Act, 1949
- Section 22(3)(b) read with Section 56 of the Banking Regulation Act, 1949
- Section 22(3)(c) read with Section 56 of the Banking Regulation Act, 1949
- Section 22(3)(e) read with Section 56 of the Banking Regulation Act, 1949
- Section 5(b) read with Section 56 of the Banking Regulation Act, 1949
Action Facts
- Primary Impact
- License cancellation
- Order Date
- 9 Aug 2021
- Effective From
- 13 Aug 2021
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank