In a significant development, the Reserve Bank of India (RBI) has revoked the banking license of Mahalaxmi Sahakari Bank, a co-operative bank located in Dharwad, Karnataka.
The cancellation of the license, which took effect on June 27, 2023, leaves customers of the bank unable to deposit money and triggers a transformation of the institution into a non-banking entity, as directed by the RBI.
The decision to cancel the license was made under Section 5(B) of the Banking Regulation Act, with the RBI citing reasons that led to this regulatory action.
This recent move adds to the growing list of cooperative banks that have faced similar consequences from the RBI.
Notably, in April 2023, the Adoor Co-operative Urban Bank had its license revoked, relegating it to operate solely as a non-banking financial company (NBFC).
Furthermore, the RBI has recently imposed heavy penalties on seven other cooperative banks for non-compliance with regulations.
The penalized banks include Textile Traders Co-operative Bank Ltd, Ujjain Nagrik Hakri Bank, Panihati Co-operative Bank, The Berhampur Co-operative Urban Bank, Solapur Siddheshwar Sahakari Bank, Uttar Pradesh Co-operative Bank Ltd, and Uttarpara Co-operative banks.
These developments underscore the RBI’s commitment to maintaining the stability and integrity of the banking sector by enforcing strict adherence to regulations.
Customers of Mahalaxmi Co-operative Bank, however, now face restrictions on depositing money as the institution transitions to its new non-banking status.
