Karad Janata Sahakari Bank's licence cancelled: here's why

Mumbai: The Reserve Bank of India (RBI) on Tuesday (December 8) cancelled the licence of The Karad Janata Sahakari Bank with effect from the close of business on December 7, 2020, as the lender does not have adequate capital and earning prospects.

The RBI order said, "The Commissioner for Cooperation and Registrar of Cooperative Societies, Maharashtra has also been requested to issue an order for winding up the bank and appoint a liquidator for the bank." 

The RBI had already imposed select restrictions on the bank since November 2017, besides ordering to appoint a liquidator for the bank.

The RBI maintained that the bank has failed to comply with the Banking Regulation Act, and its continuance was prejudicial to the interests of its depositors and the lender. With its present financial position, the bank would be unable to pay its present depositors in full, the order said.

According to Section 22 of the Banking Regulation Act, the bank does not have the capital and the scope of earnings. It also cited that the bank failed to meet the standards of Section 56 of the Banking Regulation Act, 1949.

According to the RBI, every depositor is entitled to repayment of their deposits up to a monetary ceiling of Rs 5 lakh only from the Deposit Insurance and Credit Guarantee Corporation (DICGC) as per usual terms and conditions.

"More than 99 percent of the depositors of the bank will get full payment of their deposits from DICGC," the RBI added.