RBI cancels licence of Karnala Nagari Sahakari Bank, check what will happen with investors

New Delhi: The Reserve Bank of India (RBI) on Friday (August 13) announced that it has cancelled the licence of Karnala Nagari Sahakari Bank Ltd., Panvel (District - Raigad), Maharashtra. 

RBI had issued an order dated August 09, 2021, to bring license cancellation into effect. In a press statement, RBI said that the ceases to carry on banking business with effect from the close of business on August 13, 2021. 

“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 said. 

Citing the reasons behind the cancellation of the license of Karnala Nagari Sahakari Bank, the RBI said that the bank does not have adequate capital and earning prospects. “As such, it does not comply with the provisions of section 11(1) and section 22 (3) (d) read with section 56 of the Banking Regulation Act, 1949,” the central bank noted. 

The RBI also highlighted that Karnala Nagari Sahakari Bank has also failed to comply with the requirements of section 22(3) (a), 22 (3) (b), 22(3)(c), 22(3) (d) and 22(3)(e) read with section 56 of the Banking Regulation Act, 1949;

“The continuance of the bank is prejudicial to the interests of its depositors. The bank with its present financial position would be unable to pay its present depositors in the full and public interest would be adversely affected if the bank is allowed to carry on its banking business any further.” 

What will happen to the depositors of Karnala Nagari Sahakari Bank? 

About 95% of the depositors of the Nagari Sahakari Bank are expected to receive full amounts of their deposits under the Deposit Insurance and Credit Guarantee Corporation (DICGC). Also Read: India’s exports up 49.85% in July to record high of $35.43 billion

However, 5% of the depositors will receive only up to Rs 5,00,000 irrespective of how much money they had deposited in the bank, subject to the provisions of the DICGC Act, 1961. Also Read: Mahindra XUV700 launch tomorrow: Check specs, expected price and booking details