However, Subhadra Local Area Bank has enough liquidity to pay all its depositors, the RBI said in a statement.
The RBI on Thursday said it has cancelled the licence of Subhadra Local Area Bank, Kolhapur, as its affairs were conducted in a "manner detrimental" to the interests of its present and future depositors.
The bank had breached the minimum net worth requirement for two quarters in the financial year 2019-20, the RBI said in a statement.
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However, Subhadra Local Area Bank has enough liquidity to pay all its depositors, it added.
"Public interest would be adversely affected if it is allowed to continue to do the business in the manner in which it is functioning", the RBI said, adding that the general character of the management is considered prejudicial to the interest of the present and future depositors.
The licence issued to Subhadra Local Area Bank stands cancelled to carry out banking business from the close of business on December 24, 2020.
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Consequent to the cancellation of the licence, the bank is prohibited from conducting the business of banking or any additional business envisaged under the Banking Regulation Act, 1949 with immediate effect.
The Reserve Bank of India will make an application for winding up before the High Court, the central bank added.
