Shree Mahalaxmi Mercantile Co-operative Bank Loses Licence: RBI’s Immediate Action

Immediate Cancellation

The Reserve Bank of India (RBI) has cancelled the licence of The Shree Mahalaxmi Mercantile Co-operative Bank Ltd., Dabhoi, Gujarat, with immediate effect. The bank has ceased to carry on banking business from the close of business on January 12, 2024.

Reasons for Cancellation

The Shree Mahalaxmi Mercantile Co-operative 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 also failed to comply with the requirements of Section 22 (3) (a), 22 (3) (b), 22 (3) ©, 22 (3) (d) and 22 (3) (e) read with Section 56 of the Banking Regulation Act, 1949.

Impact on Depositors

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. Public interest would be adversely affected if the bank is allowed to carry on its banking business any further.

Next Steps

Consequent to the cancellation of its licence, The Shree Mahalaxmi Mercantile Co-operative Bank Ltd., Dabhoi, is prohibited from conducting the business of ‘banking’ which includes, among other things, 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. The Registrar of Cooperative Societies, Gujarat has also been requested to issue an order for winding up the bank and appoint a liquidator for the bank.

Deposit Insurance

On liquidation, every depositor would be entitled to receive deposit insurance claim amount of his/her deposits up to a monetary ceiling of ₹5,00,000/- (Rupees Five Lakh only) from the Deposit Insurance and Credit Guarantee Corporation (DICGC) subject to the provisions of the DICGC Act, 1961. As per the data submitted by the bank, 99.36% of the depositors are entitled to receive the full amount of their deposits from DICGC. As on September 30, 2023, DICGC has sanctioned ₹24.58 crore of the total insured deposits under the provisions of Section 18A of the DICGC Act, 1961 based on the willingness received from the concerned depositors of the bank.