In a significant development, the Reserve Bank of India (RBI) has cancelled the banking licence of the Karad Janata Sahakari Bank Ltd with effect from the close of business on December 7, 2020. The RBI has cited that the bank does not have adequate capital and earning prospects.
The bank has around 29 branches in Satara, Sangli, Kolhapur, Pune and Mumbai districts and 32,000 members. These branches were closed down following the RBI decision. The Commissioner for Cooperation and Registrar of Cooperative Societies, Maharashtra, has also been requested to issue an order for winding up the bank. Deputy Registrar Manohar Mali has been appointed liquidator.
The bank was under All Inclusive Directions since November 7, 2017, and, thereafter, the board of directors of the bank was dismissed and an administrator was appointed on August 6, 2019.
With the cancellation of bank licence, the process of paying its depositors will begin. On liquidation, every depositor is entitled to repayment of his/her deposits up to Rs 5 lakh only, from the Deposit Insurance and Credit Guarantee Corporation (DICGC) as per the usual terms and conditions. More than 99 per cent of depositors will get full payment of their deposits from the DICGC.
The inquiry was launched after a member of the bank lodged a complaint with the court, alleging unauthorised loan disbursement, non-performing loans and corruption. During the probe, allegations of corruption worth over Rs 300 crore were levelled against the bank and a case was registered against the then board of directors.
The RBI, in its communication, said the cancellation of licence was done as the bank does not have adequate capital and earning prospects. Further, the bank does not comply with the provisions of Banking Regulation Act, 1949. ββThe 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,ββ the RBI added.