The havoc of the Reserve Bank of India (RBI) on the co-operative banks facing the crisis continued in the financial year 2023 as well. Moneycontrol analysis shows RBI cancels licenses of 8 co-operative banks in FY2023 and fines 114 co-operative banks for irregularities
The havoc of the Reserve Bank of India (RBI) on the co-operative banks facing the crisis continued in the financial year 2023 as well. Moneycontrol’s analysis shows that the RBI canceled the licenses of 8 co-operative banks in FY2023 and fined 114 co-operative banks for irregularities. Co-operative banks have played an important role in taking banking services to the rural and semi-rural areas of the country.
Today, however, these banks are grappling with issues ranging from dual regulation, poor financial health to interference from local politicians. The Reserve Bank of India (RBI) has started cracking down on cooperative banks that indulge in irregularities.
Licenses of these banks were canceled
The banks whose licenses have been canceled by the RBI in FY2023 include Mudhol Cooperative Bank, Millath Cooperative Bank, Shri Anand Cooperative Bank, Rupee Cooperative Bank, Deccan Urban Cooperative Bank, Lakshmi Cooperative Bank, Seva Vikas Cooperative Bank and Babaji Date Mahila Urban Cooperative Bank. Banks included.
The reasons for canceling the licenses of these banks ranged from insufficient capital to failure to comply with legal regulations under the Banking Regulation Act and lack of future earning potential.
RBI has been keeping a close watch on the co-operative banking sector for the past several years. The central bank had canceled the license of 12 banks in 2022. A year before this, in 2021, RBI canceled the license of three banks. In 2020, two cooperative banks were asked to wind up their business.
Financial penalty
RBI has also imposed fine ranging from Rs 50 thousand to Rs 5 lakh on these banks for violation of various rules. Normally, before asking a co-operative bank to cease business, RBI warns them through several penalties. However, where the RBI sees that the bank is continuously violating the rules, its license is suspended.
Mudit Verma, director, National Federation of Urban Co-operative Banks and Credit Societies (NAFCUB), said, “When the regulator imposes penalty on a bank, it is with the intention of highlighting various issues in their business. Because the co- The operative banks are spread across the country and are present in all cities, so the impact could be greater.”
