RBI cancels licence of Maharashtra-based Subhadra Local Area Bank

The Reserve Bank of India (RBI) on Thursday cancelled the licence of Maharashtra-based Subhadra Local Area Bank. The central bank has cancelled the lender's licence with effective from close of business on December 24, 2020, citing that banking affairs were "conducted in a manner detrimental to the interests of its present and future depositors".

"The Reserve Bank of India (RBI) has, vide order dated December 24, 2020 cancelled the banking licence issued to Subhadra Local Area Bank Ltd., Kolhapur, Maharashtra under Section 22 (4) of the Banking Regulation Act, 1949 to carry on banking business in India. The order is made effective from close of business on December 24, 2020," the apex bank notified.

The RBI said that the public interest would be adversely affected if the bank is allowed to continue to do the business in the manner in which it is functioning. "The general character of the management is considered prejudicial to the interest of the present and future depositors," it added.

The RBI, however, said that Subhadra Local Area Bank has enough liquidity to pay all its depositors.

As per the RBI, the bank had breached the minimum net worth requirement for two quarters in the financial year 2019-20.

Following the cancellation of the licence, Subhadra Local Area Bank 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 central bank will make an application for winding up before the High Court, it said.

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