India’s banking regulator RBI has canceled the license of Maharashtra-based Laxmi Cooperative Bank. The decision comes after a cap of Rs 1,000 was imposed on withdrawals from the bank last year, in view of its deteriorating financial condition. Depositors can claim a maximum of Rs 5 lakh from the bank which was established almost a century back in 1929.
The RBI cited lack of adequate funds and earning prospects as the reason behind its decision to suspend the bank’s license. It also mentioned non-compliance by the bank as a reason behind the order which comes into effect starting today
Apart from Laxmi Cooperative Bank, Pune-based Rupee Cooperative Bank also lost its license after 110 years. Deposits in cooperative banks had declined from more than six per cent to 3.5 per cent between 2018 and 2020. The reduced towards the agricultural sector is also believed to have left cooperative banks struggling for survival.
The worst crisis to hit a cooperative bank in recent times came to light in the form of the Punjab and Maharashtra Cooperative Bank scam. It was revealed in 2019 that the bank had created fake accounts to hide loans worth Rs 6,700 crore given to HDIL, which was facing bankruptcy. Earlier this year, PMC was merged with Unity Small Finance Bank.
