RBI Takes Action: License Of THIS Bank Cancelled – How Will Customers' Money Be Affected?

In a significant move, the Reserve Bank of India ( RBI ) has revoked the license of the Shankarrao Pujari Nutan Nagari Sahakari Bank Limited , located in Ichalkaranji, Kolhapur, effective as of the close of business on December 4, 2023. This decision came as a result of the bank's inability to maintain sufficient capital and viable earning prospects, a violation of regulatory provisions outlined in the Banking Regulation Act, 1949.

The RBI's action signifies a complete cessation of banking operations for the institution. Additionally, the Commissioner for Cooperation and Registrar Cooperative Societies in Maharashtra has been approached to initiate the bank's liquidation process by appointing a suitable liquidator.

The decision to cancel the license was propelled by multiple factors. The bank failed to meet the criteria laid down in various sections of the Banking Regulation Act, including Sections 11(1), 22(3)(a), 22(3)(b), 22(3)(c), 22(3)(d), and 22(3)(e), raising concerns regarding its ability to safeguard the interests of its depositors. The RBI emphasized that the bank's continued functioning would be detrimental to the depositors' interests and could potentially impede the institution's ability to fulfill its financial obligations towards its depositors.

Consequently, the RBI has strictly prohibited Shankarrao Pujari Nutan Nagari Sahakari Bank Limited from engaging in any further banking activities, encompassing the acceptance and repayment of deposits, in accordance with Section 5(b) read with Section 56 of the Banking Regulation Act, 1949.

Amidst these regulatory measures, the question arises about the fate of the customers' funds following the license cancellation. In such cases of liquidation, the Deposit Insurance and Credit Guarantee Corporation (DICGC) ensures that depositors are safeguarded. Each depositor will be entitled to claim up to Rs 5,00,000 (Rupees five lakh only) from the DICGC, as per the provisions of the DICGC Act, 1961, as a part of their deposit insurance claim.

Based on the data provided by the bank, a substantial majority—99.85%—of the depositors are expected to receive the full amount of their deposits from the DICGC. Notably, as of July 24, 2023, the DICGC had already disbursed Rs 41.60 crore to depositors, covering insured deposits under the provisions of Section 18A of the DICGC Act, 1961, following the consent received from the concerned depositors of the bank.