The Reserve Bank of India has suspended two cooperative banks’ operations.

The Reserve Bank of India (RBI) decided to revoke the licenses of two cooperative banks on Tuesday. Sri Sharada Mahila Co-operative Bank, located in Tumkur, Karnataka, and Harihareshwar Sahakari Bank, located in Wai, Satara, were both affected by the decision. Neither institution possessed sufficient capital nor significant earning potential. The Reserve Bank of India (RBI) announced in a statement that the Harihareshwar Sahakari Bank would no longer be conducting banking operations as of the end of business on July 11, 2023.

The Deposit Insurance and Credit Guarantee Corporation (DICGC) is obligated to pay back the total amount of money deposited by about 99.96% of the customers of the Harihareshwar Sahakari Bank. In the case of Sri Sharada Mahila Co-operative Bank, about 97.82% of the depositors are eligible to receive the full amount of their deposits from the Deposit Insurance and Credit Guarantee Corporation (DICGC). This is because the bank was insured by the DICGC.

In the event of liquidation, each depositor would be eligible to receive a deposit insurance claim amount from DICGC equal to the value of his or her deposits, up to a maximum of Rs 5 lakh. Due to the fact that their licenses were revoked, the banks are no longer permitted to engage in the “banking” activity, which includes, among other things, the acceptance of deposits and the repayment of deposits.

The Reserve Bank of India (RBI) stated, “Cooperative banks do not have adequate capital and earning prospects,” which led to the cancellation of the license. It was also said that given the current state of the banks’ finances, it would be impossible for them to make full payments to its existing depositors.

As of the 8th of March in 2023, the DICGC has already paid out Rs. 57.24 crore of the total deposits that were protected by the bank. As of the 12th of June in 2023, DICGC had already paid Rs 15.06 crore to the depositors of Sri Sharada Mahila Co-operative Bank out of the entire insured deposits.

In addition, the RBI requested that the Commissioner for Co-operation and Registrar of Cooperative Societies in Maharashtra issue an order for winding up the bank and appoint a liquidator for the bank. Both of these actions were taken in response to the request made by the RBI.