RBI cancels licence of Karnataka-based Shree Mahalaxmi Urban Co-operative Credit Bank
Mumbai, June 18
The Reserve Bank of India on Thursday cancelled the licence of Karnataka-based Shree Mahalaxmi Urban Co-operative Credit Bank, citing its deteriorating financial condition, inadequate capital and poor earning prospects.
In a statement, the RBI said the bank, located in Gokak, does not have sufficient capital and fails to comply with certain provisions of the Banking Regulation Act, 1949.
The central bank added that the lender, in its current financial position, would be unable to repay its existing depositors in full.
"The Reserve Bank of India has cancelled the licence of Shree Mahalaxmi Urban Co-operative Credit Bank Ltd., Gokak, Karnataka, under Section 22 read with Section 56 of the Banking Regulation Act, 1949 (BR Act)," the central bank said.
"Consequently, the bank ceases to carry on banking business, with effect from the close of business on June 18, 2026," it added.
The RBI said allowing the bank to continue its operations would be prejudicial to the interests of depositors and could adversely affect public confidence in the cooperative banking sector.
Following the cancellation of the licence, Shree Mahalaxmi Urban Co-operative Credit Bank has been prohibited from carrying out banking activities with immediate effect.
The restrictions include accepting fresh deposits and repaying existing deposits, among other banking operations.
The central bank has also requested the Registrar of Co-operative Societies, Karnataka, to initiate the process of winding up the bank and appoint a liquidator.
"The Registrar of Co-operative Societies, Karnataka has also been requested to issue an order for winding up the bank and appoint a liquidator for the bank," RBI said.
The RBI noted that depositors are protected under the deposit insurance framework administered by the Deposit Insurance and Credit Guarantee Corporation (DICGC).
According to the regulator, around 97.9 per cent of the bank's depositors are expected to receive the full amount of their insured deposits from the DICGC once the liquidation process begins.
— IANS
Reader Comments
This is why I always tell my parents to only trust nationalized banks or the big private ones like HDFC. These urban co-operative banks are too risky, especially in smaller towns. RBI should have stricter monitoring to prevent such failures.
Good that DICGC is stepping in, but the process to get claims is often slow. My uncle had deposits in a co-operative bank that went bust in 2019—took him 8 months to get his money back. Hope the liquidator speeds things up for these depositors. 🙏
As someone who worked in banking regulation in the US, I can say India's DICGC framework is actually quite robust compared to many countries. 97.9% coverage is impressive. Still, unfortunate for the remaining 2.1%—they'll likely get only partial recovery through liquidation.
Sad for the depositors, but RBI had no choice. A bank that can't even meet basic capital requirements is a ticking time bomb. The cooperative sector needs major reforms—too many of these small banks are poorly managed and often run like personal fiefdoms. 😤
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