Mahalaxmi Co-operative Bank, located in Dharwad, Karnataka, has recently experienced a significant setback as the Reserve Bank of India (RBI) has decided to cancel its banking license. Effective from June 27, 2023, this move leaves the bank's customers in a state of limbo, unable to deposit their funds. The RBI's decision also entails a transformation for the bank, requiring it to operate as a non-banking entity going forward.

The revocation of the license falls under Section 5(B) of the Banking Regulation Act, with the RBI pointing to specific reasons that prompted this regulatory action. Sadly, this turn of events adds Mahalaxmi Co-operative Bank to an ever-increasing roster of cooperative banks that have faced similar consequences at the hands of the RBI.

A recent example of such repercussions occurred in April 2023 when the license of Adoor Co-operative Urban Bank was revoked, relegating it to operate solely as a non-banking financial company (NBFC). Additionally, the RBI has recently imposed hefty penalties on seven other cooperative banks due to their non-compliance with regulatory requirements.

Among the penalized banks are Textile Traders Co-operative Bank Ltd, Ujjain Nagrik Hakri Bank, Panihati Co-operative Bank, The Berhampur Co-operative Urban Bank, Solapur Siddheshwar Sahakari Bank, Uttar Pradesh Co-operative Bank Ltd, and Uttarpara Co-operative banks.

These recent developments highlight the RBI's unwavering dedication to upholding the stability and integrity of the banking sector through the strict enforcement of regulations.

Consequently, customers of Mahalaxmi Co-operative Bank now face limitations when it comes to depositing their money as the institution transitions into its new non-banking status.