The Reserve Bank of India (RBI) today cancelled the licence of Maharashtra's Laxmi Co-operative Bank Limited, saying the Solapur-based lender lacks adequate capital and earning prospects.

The co-operative bank ceases to carry on banking business from the close of business on September 22, 2022, the RBI said. 

The RBI requested Maharashtra's Commissioner for Cooperation and Registrar of Cooperative Societies to issue an order for winding up the bank and appoint a liquidator for it.

"The Laxmi Co-operative Bank Limited, Solapur, Maharashtra 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 RBI said in a statement.

Besides not having adequate capital and earning prospects, the bank, RBI said, failed to comply with the regulatory requirements.

"Today, the Reserve Bank of India (RBI), vide order dated September 14, 2022, has cancelled the licence of “The Laxmi Co-operative Bank Limited, Solapur, Maharashtra". Consequently, the bank ceases to carry on banking business, with effect from the close of business on September 22, 2022," the RBI statement said.

The bank with its present financial position would be unable to pay its present depositors in full and public interest would be adversely affected, RBI added.

RBI said that on liquidation, every depositor would be entitled to receive a deposit insurance claim amount up to Rs 5 lakh from the Deposit Insurance and Credit Guarantee Corporation (DICGC). 

As per the data submitted by the bank, 99% of the depositors are entitled to receive the full amount of their deposits from DICGC. 

As of 13 September 2022, the DICGC has already paid Rs 193.68 crore of the total insured deposits, RBI said.