RBI cancels licence of Karad Janata Sahakari Bank: Know what will happen depositors and their money

New Delhi: The RBI has cancelled the licence of The Karad Janata Sahakari Bank Ltd, Karad, Maharashtra, as it does not have adequate capital and earning prospects.

“The Reserve Bank of India (RBI) has, vide order dated December 7, 2020 cancelled the licence of The Karad Janata Sahakari Bank Ltd., Karad, Maharashtra to carry on banking business, with effect from from the close of business on December 7, 2020. The bank was under All Inclusive Directions since November 07, 2017. 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,” an RBI statement said.

Also read: Here’s why you should not keep more than Rs 5 lakh in one bank

What will happen to Karad Janata Sahakari Bank depositors and their deposits?

More than 99 per cent of the depositors of the bank will get full payment of their deposits from Deposit Insurance and Credit Guarantee Corporation (DICGC), the Reserve Bank said in a statement.

On liquidation, every depositor is entitled to repayment of his/her deposits up to a monetary ceiling of Rs 5 lakh only from the Deposit Insurance and Credit Guarantee Corporation (DICGC) as per usual terms and conditions.

Why did RBI cancel Karad Janata Sahakari Bank licence?

RBI has highlighted five reasons as to why Karad Janata Sahakari Bank licence was cancelled

• 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 bank has 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 full; and
   
• Public interest would be adversely affected if the bank is allowed to carry on its banking business any further

Consequent to the cancellation of its licence, The Karad Janata Sahakari Bank Ltd, Karad, Maharashtra is prohibited from conducting the business of ‘banking’ which includes acceptance of deposits and repayment of deposits as defined in Section 5(b) read with Section 56 of the Banking Regulation Act, 1949 with immediate effect.