The Reserve Bank of India (RBI) on Tuesday cancelled the licence of Maharashtra-based The Karad Janata Sahakari Bank. The central bank has cancelled the lender's licence with effect from the close of business on December 7, 2020, citing that it does not have adequate capital and earning prospects.
"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 in its order.
Following the cancellation of its licence, The Karad Janata Sahakari Bank has been prohibited from conducting the business of 'banking' which includes acceptance of deposits and repayment of deposits with immediate effect.
"With the cancellation of licence and commencement of liquidation proceedings, the process of paying the depositors of the bank will be set in motion," the central bank notified.
On liquidation, 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 extant terms and conditions.
"More than 99 per cent of the depositors of the bank will get full payment of their deposits from DICGC," the RBI said.
In its order, the central bank has maintained that The Karad Janata Sahakari Bank has failed to comply with the provisions of Banking Regulation Act. The continuance of the bank was prejudicial to the interests of its depositors as the lender, with its present financial position, would not be able to pay its present depositors in full, it further stated.
"Public interest would be adversely affected if the bank is allowed to carry on its banking business any further," it said.
By Chitranjan Kumar