RBI Revokes License of Mahabhairab Cooperative Urban Bank Ltd Due to Financial Failures

The RBI has revoked the license of Mahabhairab Cooperative Urban Bank Ltd due to financial non-compliance.

July 27, 2024

The Reserve Bank of India (RBI) has revoked the banking license of Mahabhairab Cooperative Urban Bank Ltd., located in Tezpur, Assam. The bank will halt all banking activities effective from the end of business on July 24, 2024.

The RBI’s decision was based on the bank’s insufficient capital and poor earnings prospects, which breach the standards set by the Banking Regulation Act, 1949.

According to Section 11(1) of the Banking Regulation Act, 1949, banks must maintain a minimum level of paid-up capital and reserves to ensure they are financially sound and able to meet their obligations to depositors.

Section 22(3)(d) addresses the operational and financial discipline required of banks, mandating adherence to specific standards and practices to ensure regulatory compliance and sound operation.

Section 56 grants the RBI the authority to cancel a bank’s license if it fails to meet regulatory standards, including those related to capital adequacy and overall financial health.

The RBI found that Mahabhairab Cooperative Urban Bank Ltd. did not meet the requirements outlined in Sections 22(3)(a), 22(3)(b), 22(3)(c), 22(3)(d), and 22(3)(e), as well as Section 56. Specifically:

Section 22(3)(a) mandates that a bank must not begin or continue operations without a valid RBI license.
Section 22(3)(b) requires banks to maintain adequate liquidity to meet financial obligations, ensuring they have sufficient cash or easily convertible assets.
Section 22(3)(c) stipulates that banks must follow prudent banking practices, including effective risk management and robust internal controls.
Section 22(3)(e) obliges banks to comply with RBI directives concerning their operations and financial management.

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