Mumbai, Jun 4 (IANS): The Reserve Bank of India (RBI) has cancelled the licence of Banaras Merchantile Co-operative Bank Limited, Varanasi.

The Reserve Bank said the licence of the bank has been cancelled as it does not have adequate capital and earning prospects.

Consequently, the bank ceases to carry on banking business with effect from the close of business on Thursday (July 4).

“Consequent to the cancellation of its licence, Banaras Merchantile Co-operative Bank Limited, Varanasi, is prohibited from conducting the business of ‘banking’ which includes, among other things, acceptance of deposits and repayment of deposits with immediate effect,” the RBI said.

The Commissioner for Cooperation and Registrar of Cooperative Societies, Uttar Pradesh, has also been requested to issue an order for winding up the bank and appoint a liquidator for it, the RBI said on Thursday.

Observing that the continuance of the Varanasi bank is prejudicial to the interests of its depositors, the RBI said “the bank with its present financial position would be unable to pay its present depositors in full".

The RBI added, “Public interest would be adversely affected if the bank is allowed to carry on its banking business any further.”

The RBI also said that on liquidation, every depositor would be entitled to receive deposit insurance claim amount of his/her deposits up to a monetary ceiling of Rs 5 lakh from the Deposit Insurance and Credit Guarantee Corporation (DICGC) subject to the provisions of DICGC Act, 1961.

As per the data submitted by the bank, 99.98 per cent of the depositors are entitled to receive the full amount of their deposits from DICGC.

As of April 30, 2024, DICGC has already paid Rs 4.25 crore of the total insured deposits under the provisions of Section 18A of the DICGC Act, 1961, based on the willingness received from the concerned depositors of the bank.