RBI cancels licence of Maharashtra-based Subhadra Local Area Bank

RBI on December 24 said it has cancelled the banking licence issued to Subhadra Local Area Bank Ltd, Kolhapur, citing problems in the way the bank was run.

The licence has been cancelled under Section 22 (4) of the Banking Regulation Act, 1949 and the order is made effective from close of business on December 24, 2020, the RBI said.

Explaining the action, the RBI said the cancellation is on account of the fact that the affairs of the Subhadra Bank were conducted in a manner detrimental to the interests of its present and future depositors.

Public interest would be adversely affected if it is allowed to continue to do the business in the manner in which it is functioning, the RBI said.

Further, the general character of the management is considered prejudicial to the interest of the present and future depositors and the bank had breached the minimum net worth requirement for two quarters in the financial year 2019-20, the RBI said.

“Consequent to the cancellation of the licence, Subhadra Local Area Bank Ltd is prohibited from conducting the business of ‘banking’ as defined in Section 5(b) or any additional business envisaged under Section 6 of the Banking Regulation Act, 1949, with immediate effect,” the RBI said in a release.

The RBI will make an application for winding up before the High Court. Subhadra Local Area Bank Ltd has enough liquidity to pay all its depositors, the RBI said.

On liquidation, every depositor is entitled to repayment of his/her deposits up to a monetary ceiling of Rs 5,00,000 from the Deposit Insurance and Credit Guarantee Corporation (DICGC) as per usual terms and conditions.

More than 99 per cent of the depositors of the Karad bank will get full payment of their deposits from DICGC, the RBI said.

“Consequent to the cancellation of the licence, Subhadra Local Area Bank Ltd is prohibited from conducting the business of ‘banking’ as defined in Section 5(b) or any additional business envisaged under Section 6 of the Banking Regulation Act, 1949, with immediate effect,” the RBI said in a release.

The RBI will make an application for winding up before the High Court. Subhadra Local Area Bank Ltd has enough liquidity to pay all its depositors, the RBI said.

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