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RBI Cancels License Of Kolhapur Based Shankarrao Pujari Nutan Nagari Sahakari Bank Limited

 

The Reserve Bank of India (RBI) made a significant move on Monday by canceling the license of Kolhapur-based (Maharashtra) Shankarrao Pujari Nutan Nagari Sahakari Bank Limited, Ichalkaranji. The apex bank instructed the bank to cease all banking operations, effective from the close of business on December 4, 2023.

Prohibition on Banking Business

  • In a statement, the RBI declared that Shankarrao Pujari Nutan Nagari Sahakari Bank Limited is now prohibited from conducting the business of ‘banking,‘ which encompasses the acceptance and repayment of deposits as defined in Section 5(b) read with Section 56 of the Banking Regulation Act, 1949.
  • This immediate action was taken as the co-operative bank was found to be lacking in adequate capital and earning prospects, thereby violating the provisions of Section 11(1) and Section 22 (3) (d) read with Section 56 of the Banking Regulation Act, 1949.

Adverse Impact on Public Interest

  • The RBI justified its decision by stating that allowing Shankarrao Pujari Nutan Nagari Sahakari Bank Limited to continue its banking business would adversely affect public interest. The bank, with its current financial position, would be incapable of fully repaying its depositors.
  • In the event of liquidation, the RBI assured that every depositor would be entitled to receive a deposit insurance claim amount of up to ₹5,00,000 from the Deposit Insurance and Credit Guarantee Corporation (DICGC), as per the provisions of the DICGC Act, 1961.

Deposit Insurance and Payment to Depositors

  • According to data submitted by the bank, 99.85% of depositors are set to receive the full amount of their deposits from DICGC.
  • As of July 24, the DICGC has already disbursed ₹41.60 crore of the total insured deposits under the provisions of Section 18A of the DICGC Act, 1961, based on the willingness received from the concerned depositors.

Winding Up the Bank

  • The RBI has directed the Commissioner for Cooperation and Registrar Cooperative Societies, Maharashtra, to issue an order for winding up the bank and appoint a liquidator for the process.

Monetary Penalties on Other Co-operative Banks

  • In addition to the cancellation of Shankarrao Pujari Nutan Nagari Sahakari Bank’s license, the RBI imposed monetary penalties on four other co-operative banks earlier on the same day.
  • The penalized banks are:
    Sno. Penalized Banks
    1 Jijamata Mahila Sahakari Bank Ltd
    2 Shri Laxmikrupa Urban Co-operative Bank Ltd
    3 The Konark Urban Cooperative Bank Ltd
    4 The Chembur Nagarik Sahakari Bank Ltd
  • These penalties were levied due to deficiencies in regulatory compliance, emphasizing the RBI’s commitment to maintaining the integrity and stability of the banking sector.
  • The move underscores the importance of adherence to regulatory standards to ensure the sound functioning of co-operative banks in India.

Questions Related to Exams

Q1. Why did the Reserve Bank of India (RBI) cancel the license of Shankarrao Pujari Nutan Nagari Sahakari Bank Limited, Ichalkaranji?

Answer: The RBI canceled the bank’s license due to its lack of adequate capital and earning prospects, violating provisions in the Banking Regulation Act, 1949.

Q2. Why did the RBI find it necessary to cancel the banking license based on the Banking Regulation Act, 1949?

Answer: The co-operative bank failed to comply with certain sections of the Banking Regulation Act, 1949, prompting the RBI to cancel its banking license.

Q3. According to data submitted by the bank, what percentage of depositors are expected to receive the full amount of their deposits from DICGC?

Answer: According to the bank’s data, 99.85% of depositors are set to receive the full amount of their deposits from DICGC.

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