RBI cancels Laxmi Co-operative Bank’s licence: Will depositors get their full money back?


The Reserve Bank of India (RBI) announced that it has withdrawn the Solapur-based Laxmi Co-operative Bank‘s banking licence. The bank will cease to carry on banking business, with effect from September 22, 2022.

According to RBI’s notification issued on September 22, 2022, Laxmi Co-operative’s licence was canceled because:

  • The 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 failed to comply with the requirements of Sections 22(3) (a), 22 (3) (b), 22(3)(c), 22(3) (d) and 22(3)(e) read with Section 56 of the Banking Regulation Act, 1949;
  • 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; and
  • Public interest would be adversely affected if the bank is allowed to carry on its banking business any further.

“Consequent to the cancellation of its licence, “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.

What happens to the deposits?

According to a news report in the Economic Times, data submitted by the bank states that about 99% of the depositors are entitled to receive the full amount of their deposits from DICGC.

As per the RBI press release, “On liquidation, every depositor would be entitled to receive deposit insurance claim amount of his/her deposits up to a monetary ceiling of Rs 5,00,000/- (Rupees five lakh only) from Deposit Insurance and Credit Guarantee Corporation (DICGC) subject to the provisions of DICGC Act, 1961. As per the data submitted by the bank, about 99% of the depositors are entitled to receive full amount of their deposits from DICGC. As on September 13, 2022, DICGC has already paid Rs 193.68 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.”

As of September 13, 2022, the DICGC had already paid Rs 193.68 crore of the total insured deposits under Section 18A of the DICGC Act, 1961, based on the willingness of the bank’s depositors.

What is claims settlement?

In terms of provisions of the DICGC Act, 1961, on cancellation of registration as an insured bank, the Corporation is liable to pay every depositor, the eligible amount subject to the limit of the insurance cover, based on his deposit/s and loans in the bank as on the cut-off date.

What is the timeframe permitted for preparing the list of claims by liquidator ?

The statutory requirement is that after the liquidator’s appointment, he should submit the claim list in such form and manner stipulated by DICGC, with least possible delay and under any circumstances not later than 3 months from the date of his/her assuming charge as liquidator.



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