Recorded RBI impact
License cancellation
License cancellation · Fresh imposition
Published by RBI
27 Jun 2023
Case Brief
RBI has cancelled the banking licence of Mahalaxmi Cooperative Bank Ltd., Dharwad, Karnataka, which had been granted on March 23, 1994, and has notified it as a non-banking institution under Section 36A(2) read with Section 56 of the Banking Regulation Act, 1949. The cancellation takes effect from the close of business on June 27, 2023. Following this, the entity must stop conducting banking business as defined under Section 5(b) of the Act, including acceptance of deposits from non-members. RBI also stated that the bank must repay unpaid and unclaimed deposits of non-members whenever demanded.
Why RBI Acted
RBI notified Mahalaxmi Cooperative Bank Ltd., Dharwad, Karnataka as a non-banking institution under Section 36A(2) read with Section 56 of the Banking Regulation Act, 1949, and cancelled the licence granted on March 23, 1994 under Section 22 read with Section 56. The cancellation is effective from the close of business on June 27, 2023. The bank is required to stop conducting ‘banking’ within the meaning of Section 5(b) of the Act, including acceptance of deposits from non-members, and to repay unpaid and unclaimed deposits of non-members whenever demanded, even after being notified as a non-banking institution.
Operating Impact
The bank can no longer conduct banking business, and it must immediately stop accepting deposits from non-members. It remains responsible for repaying unpaid and unclaimed deposits of non-members on demand, even after being converted to a non-banking institution. Customers and non-member depositors are directly affected by the cessation of banking operations.
Regulatory Basis
- Section 36A(2) read with Section 56 of the Banking Regulation Act, 1949
- Section 22 read with Section 56 of the Banking Regulation Act, 1949
- section 5(b) of the Act
Action Facts
- Primary Impact
- License cancellation
- Order Date
- 23 Mar 1994
- Effective From
- 27 Jun 2023
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank