RBI Grants Mahalaxmi Cooperative Bank NBFC License After Cancelling Banking Permit explained - Current Affairs

Headlines:

• RBI cancels Mahalaxmi Cooperative Bank Dharwad's banking licence, allows to operate as NBFC (Mint)
• RBI grants non-banking institution licence to Mahalaxmi Cooperative Bank, cancels bank permit (Moneycontrol)
• Mahalaxmi Cooperative Bank's Banking Licence Cancelled, To Operate as Non-banking Institute (Moneylife)

Important points:

• The Reserve Bank of India (RBI) has canceled the banking licence of Mahalaxmi Cooperative Bank Dharwad, with effect from the close of business on June 27, 2023.
• The central bank has allowed the bank to operate as a non-banking financial company (NBFC) under Section 36A(2) of the Banking Regulation Act, 1949.
• The bank has been directed to stop conducting the business of 'banking' within the meaning of section 5(b) of the Banking Regulation Act, 1949, including acceptance of deposits from non-members with immediate effect.
• However, the bank will be allowed to operate as a non-banking institution (NBFI).
• As an NBFC, the bank will be able to undertake a range of activities, such as lending, investment, and insurance, but it will not be able to accept deposits from the public.
• The cancellation of the banking licence is a significant development for Mahalaxmi Cooperative Bank Dharwad and its customers. The bank will need to make significant changes to its operations in order to comply with the requirements of an NBFC.
• Customers of the bank should contact the bank for more information on how the cancellation of the banking licence will affect them

 Let's Understand this topic in the following 

1. 1-What announcement did the Reserve Bank of India (RBI) make regarding Mahalaxmi Cooperative Bank Ltd on June 27?

2. Answer: The RBI revoked the banking permit of Mahalaxmi Cooperative Bank Ltd in Dharwad, Karnataka.

3. 2-When was the banking license of Mahalaxmi Cooperative Bank Ltd canceled?

4. Answer: The banking license of Mahalaxmi Cooperative Bank Ltd was canceled on June 27.

5. 3-What does the cancellation of the banking license mean for Mahalaxmi Cooperative Bank Ltd? Answer: The cancellation of the banking license does not hinder the bank's ability to engage in the business of banking and accept deposits from non-members.

6. 4-What will Mahalaxmi Cooperative Bank Ltd function as after the cancellation of its banking permit?

7. Answer: Mahalaxmi Cooperative Bank Ltd will now function as a non-banking institution.

8. 5-How will Mahalaxmi Cooperative Bank Ltd repay unpaid or unclaimed deposits held by non-members? Answer: Mahalaxmi Cooperative Bank Ltd is obligated to repay any unpaid or unclaimed deposits held by non-members upon request.

9. 6-Will the transition to a non-banking institution affect the business continuity of Mahalaxmi Cooperative Bank Ltd? Answer: No, the granting of a non-banking institution license ensures that the bank can operate seamlessly and serve its customers without disruption.

10. 7-What role will Mahalaxmi Cooperative Bank Ltd play in the local banking landscape of Dharwad, Karnataka? Answer: The bank's transition to the non-banking sector enables it to continue its financial activities, contributing to the stability of the local banking landscape in Dharwad, Karnataka.