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The Reserve Bank of India has revoked Laxmi Co-operative Bank Limited’s licence because the institution lacks appropriate capital & earning potential. The data was given by Laxmi Co-operative Bank Ltd., which demonstrates that more than 99 % of depositors are eligible to collect the total value of their savings from the Deposit Insurance & Credit Guarantee Agency. On Sept 13, 2022, the DICGC already reimbursed Rs 193.68 crores of the insured deposits. With the closing of business, Laxmi Co-operative Bank stopped conducting banking activity. Laxmi Co-operative Bank Ltd. has failed to abide by the Banking Regulations Act of 1949.
Key Takeaways
- The Reserve Bank of India has revoked Laxmi Co-operative Bank Limited’s licence due to a lack of adequate capital and earning potential.
- Laxmi Co-operative Bank Ltd. provided the data, which shows that more than 99% of depositors are eligible to receive the total value of their savings from the Deposit Insurance & Credit Guarantee Agency.
- Laxmi Cooperative Bank appears to be a cooperative bank founded in 1929 and headquartered in Solapur, Maharashtra.
- The RBI claims that the bank violated Sections 11 and 22 of the Banking Regulation Act of 1956.
Reasons for revoking of the Bank's Licence
Laxmi Cooperative Bank seems to be a cooperative bank headquartered in Solapur, Maharashtra, that has been in operation since 1929. According to the RBI, the bank violated Sections 11 & 22 of Banking Regulation Act of 1956. According to Section 11, primary co-operative banks must have a minimal capital & reserve balance of Rs. 1 lakh, & according to Section 22, the bank must be capable of repaying its depositors & generate a profit. According to the RBI, the bank’s current financial situation prevents it from paying its existing depositors the entire sum. Furthermore, allowing the bank to continue would be detrimental to the public interest because the bank’s continued existence is detrimental to the interest of deposit owners.
What comes next for the Bank?
The Maharashtra Commissioner of Cooperation & Registrar for Cooperative Societies will make an order to close the bank.
A bank liquidator should be appointed.
When the firm is dissolved and its assets are sold, each depositor is eligible for a deposit insurance pay-out payment of up to 5 lakh rupees from the DICGC.
The RBI stated that the bank lacks appropriate capital & earning potential as one of the justifications for terminating the registration. The RBI also noted that the bank was unlikely to pay its current depositors in full due to its current financial situation and that the public interest will suffer as a result.
With this revocation, The Lakshmi Co-operative Bank Ltd. would be unable to do ‘banking’ operations, which involves, among many other things, accepting deposits and repaying deposits. According to the data provided by the institution, 99% of savers are eligible for the entire amount of their savings from DICGC.
Over the last year, the crackdown against cooperative banks has gained traction. The Union government gave the RBI new powers to regulate cooperative banks in 2020. The bank authority has maintained tightening the grip on dishonest and incompetent lenders, frequently issuing fines for violating regulatory rules. Prior to the 2020 modification, the RBI possessed limited regulatory authority over cooperative banks, limiting its capacity to take fast remedial action. While the change took effect in urban cooperative banks on June 29, 2020, it took effect for state banking institutions & regional central cooperative banks on April 1, 2021.
About Laxmi Cooperative Bank
On June 6, 1929, Laxmi Co-Operative Bank Limited, Solapur, was founded in Solapur with the help of several successful attorneys. Lawyers S.N. Jamadar, Late Ganesh Dadaji Punde, and Dr K. B. Antrolikar were all actively engaged. The Hindu religion believes that Devi Laxmi is the deity of wealth. As a result, the bank’s title is Laxmi Co-Operative Bank, Solapur. The Co-Operative Society Act of Bombay was used to incorporate this on June 6, 1929, legally. This was assigned the lawyer registration number 6464. Late Ganesh Dadaji Punde has been the bank’s first president and the primary creator. Laxmi Bank was Solapur’s initial Nagari Sahakari Bank that assisted the people and developed the people’s confidence. Despite the fact that the bank offered lending plans to the public, it addressed financial demands ranging from local workgroups to big companies. They used to have a goal: their revenue would benefit society. The bank has always prioritised social welfare.
On March 10, 1939, a mortgage in silver and gold was made. The bank temporarily worked on this on August 1, 1963. Bills Reduction Loan was created in 1964. On October 26, 1965, the first outpost of this bank opened in Sakhar Peth. The bank opened its second office in Akkalkot on February 27, 1966. In 1968, the Reserve Bank conducted its first examination. On September 6, 1978, the bank celebrated its 49th anniversary and entered the Golden Year. An excellent and enlightening event was held throughout this prosperous age.
Laxmi Co-Operative Bank Limited, Solapur, has been devoted to the social purpose of its foundation. When the city of Solapur was flooded in 1961, the bank helped the victims financially. During 1987, the region of Maharashtra was suffering from a drought, resulting in a severe lack of food, fresh water, and fodder for livestock in most areas.
Understanding the necessity to solve this condition, Laxmi Co-Operative Bank Limited, Solapur, raised money on a massive level. The drought assistance group consisted of investors, consumers, and staff. Drought relief operations, such as delivering food to learners and setting up animal camps, were carried out by this committee. Dhamapur & Gulalwadi settlements in Ratnagiri district’s Sangameshwar were given drinking water. A 3200 feet pipeline, as well as a water tank, were installed for this reason.
The RBI stated that the bank’s current financial situation is such that it cannot refund its customers the whole sum deposited. The survival of Lakshmi Cooperative Bank would be detrimental to its customers’ interests since the bank has failed to meet the standards of the Bank Regulatory Law of 1949. According to a report issued by the RBI, over 99 % of depositors would get their entire deposited sum from the Deposit Insurance & Credit Guarantee Agency, based on data supplied by Laxmi cooperative bank. The DICGC is an RBI department that insures deposits maintained by customers in cooperative & commercial banks.
