The Reserve Bank of India (RBI), the country’s banking regulator, has taken action against two cooperative banks by canceling their licenses.
In separate statements issued on Tuesday, the RBI announced the cancellation of licenses for Shri Sharda Mahila Sahakari Bank in Tumkur, Karnataka, and Harihareshwar Bank in Satara, Maharashtra.
The decision was made due to the banks’ inadequate capital and lack of earning potential, making it necessary to revoke their licenses.
Deposits up to Rs 5 Lakh Safe, but Higher Amounts at Risk
The RBI has confirmed that the closure of Harihareshwar Cooperative Bank’s operations will be effective from July 11, 2023.
It’s important to note that deposits up to Rs 5 lakh in these banks are protected by the Deposit Insurance and Credit Guarantee Corporation (DICGC).
However, customers with deposits exceeding this limit may face losses beyond the insured amount.
Majority of Depositors to Receive Refunds, but Limitations Exist
According to the RBI, nearly 99.96 percent of depositors from Harihareshwar Sahakari Bank will receive their full funds from DICGC.
As of March 8, 2023, DICGC has already disbursed Rs 57.24 crore to customers of this bank.
Similarly, approximately 97.82 percent of depositors from Shri Sharda Mahila Sahakari Bank will also receive complete refunds through DICGC.
Until June 12, 2023, DICGC has returned Rs 15.06 crore to customers of this bank.
Ban Imposed on Banking Activities of Cancelled Banks
Following the license cancellations, the RBI has imposed a ban on all banking activities of both the affected banks.
They are now prohibited from accepting any deposits from customers.
Additionally, the Commissioner of Co-operative and Registrar of Co-operative Societies has been directed to issue an order to halt the operations of these banks.
Furthermore, the appointment of a liquidator for the banks has been mandated by the RBI.