RBI License Cancellation Report: Jijamata Mahila Sahakari Bank Ltd.

Key Details of Regulatory Action

The Reserve Bank of India (RBI) cancelled the banking license of Jijamata Mahila Sahakari Bank Ltd., Satara, Maharashtra, effective from the close of business on October 07, 2025. This action prohibits the bank from conducting the business of ‘banking’, including the acceptance and repayment of deposits.

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Root Cause Analysis (RCA): Reasons for License Cancellation

The cancellation stemmed from the bank’s failure to maintain regulatory standards, ultimately making its continuance detrimental to public interest and depositors’ security. The primary causes cited by the RBI point to critical financial and operational deficiencies, which were exacerbated by a lack of cooperation with the regulator.

Critical Failures:

• Inadequate Capital and Earnings Prospects: The bank did not have adequate capital and earning prospects, violating the provisions of Section 11(1) and Section 22(3)(d) read with Section 56 of the Banking Regulation Act, 1949 (BR Act). This is a common factor in cooperative bank license cancellations.
• Inability to Pay Depositors: The bank, with its present financial position, would be “unable to pay its present depositors in full”.
• Financial Deterioration and Non-Cooperation: Although the license was restored in 2019 with a directive for a “forensic audit”, the audit could not be completed due to the “non-cooperation of the bank”. Meanwhile, the bank’s financial position continued to “deteriorate” as assessed by the RBI.
• Wider Regulatory Non-Compliance: The bank failed to comply with requirements under multiple clauses of Section 22(3) of the BR Act, indicating fundamental, sustained operational and financial lapses.
• Harm to Public Interest: The continuance of the bank was deemed “prejudicial to the interests of its depositors” and public interest would be “adversely affected” if the bank was allowed to carry on its business any further.

The “root causes” align with common failures in cooperative banking, such as a severe liquidity crunch, high Non-Performing Assets (NPAs), and weak governance leading to a failure to meet Capital Adequacy Ratio (CAR) requirements.

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Preventive Controls for Cooperative Banks

To prevent the circumstances that led to this license cancellation, a cooperative bank must implement robust internal controls and adhere strictly to regulatory frameworks. Preventive measures focus on strengthening governance, financial health, and operational compliance.

Governance and Risk Management:

• Strong Corporate Governance: Implement provisions of the BR Act related to governance (like Sections 10, 10A, and 10B) which have been made applicable to cooperative banks, ensuring a competent and professional Board of Directors.
• Risk Management Framework: Approve and periodically review a comprehensive “Risk Management Framework” and Policy, with clear oversight from the Board and a dedicated Risk Management Committee (RMC). This framework should cover credit risk, liquidity risk, and compliance risk.
• Internal Audit: Adopt a “Risk-Based Internal Audit (RBIA)” framework to proactively identify vulnerabilities, rather than reactively addressing issues.
• Compliance Function: Establish a strong compliance function to ensure adherence to all laws, rules, and RBI directions (e.g., KYC, exposure limits, and CRR/SLR requirements).

Financial and Operational Health:

• Capital Adequacy: Consistently maintain the mandated minimum “Capital Adequacy Ratio (CAR)” (e.g., 9% as per RBI norms) to absorb potential losses and demonstrate financial stability.
• Asset Quality: Implement effective credit risk management to minimise the creation of “High Non-Performing Assets (NPAs)”, which erode capital and profitability.
• Liquidity Management: Maintain adequate cash reserves and liquidity ratios (like LCR) to meet present and future depositor obligations.
• Early Warning Systems (EWS): Implement a robust EWS and a Prompt Corrective Action (PCA) Framework to initiate remedial measures before financial health deteriorates severely.

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Lessons Learned for the Cooperative Banking Sector

The continuous intervention and eventual cancellation of the bank’s license underscore several critical lessons for the entire cooperative banking sector in India:

• Compliance is Non-Negotiable: A bank must proactively comply with all sections of the Banking Regulation Act, especially those concerning adequate capital, maintenance of reserves, and depositor security (Sections 11(1) and 22(3)). Failure to comply will lead to severe regulatory action.
• Mandatory Cooperation with Regulators: The refusal to cooperate with a mandated forensic audit led to the RBI’s assessment that the financial position continued to deteriorate. Full transparency and timely submission to regulatory review are mandatory to prevent the final step of license revocation.
• Consolidation and Revival: The primary option for a weak bank, beyond internal reform, is to present a concrete proposal for revival or explore the possibility of “merger” with a stronger bank. Waiting until the financial position is irreversibly detrimental to depositors eliminates these options.
• Depositor Trust Protection: The RBI’s ultimate objective is the protection of depositor interests and the public interest. Cooperative banks must prioritize sound management over all other considerations to maintain public trust in the cooperative movement.