Literature Review:

The Reserve Bank has imposed penalty of up to Rs. 5 lakh on two cooperative sector lenders Kodagu District Cooperative Central Bank and Mehsana Urban Cooperative Bank -- for violation of regulatory guidelines. "RBI has imposed a monetary penalty of Rs. 5 lakh on Kodagu District Cooperative Central Bank, Madikeri... for violating regulatory guidelines issued by the RBI on non-SLR (Statutory Liquidity Ratio) investments," the apex bank said in a statement.It also announced a penalty of Rs. 1 lakh on the Mehsana Urban Cooperative Bank for guidelines relating to admission of co-operative societies, besides customer identification norms and other violations.The RBI had issued a show cause notice to both the bank, in response to which they had submitted written replies."After considering the facts... RBI came to the conclusion that the violations were substantiated and warranted imposition of the penalty," it said.The central bank had penalised as many as 48 small banks during the January-June period of this year, for lapses in implementing customer identification norms and various other violations. Article 26 Role of the Fund in Intervention Activities 1. In effecting interventions, the Fund shall act as mandatory without representation from member banks which provide, upon request of the Fund, the necessary monies, the amount of which shall be determined pursuant to the procedures and within the limits set forth in articles 28 and 31. 2. The Fund shall undertake the responsibility of recovering the sums employed in interventions. 3. The activities and the Organization of the Fund are governed by the present Statutes and By-laws, adopted by the Assembly at the proposal of the Board, with the approval of the Bank of Italy, and by the provisions of the same Bank of Italy, according to the aforementioned Legislative Decree of 4th December 1996, n. 659. 4. The Fund shall remain in existence until 31st December 2050, which may be extended. Should liquidation of the Fund take place for any reason, the Assembly shall designate one or more liquidators, specifying their powers.

Article 6 Participation in the Fund and Persons Covered. All Italian Cooperative Banks, as stated in article, shall be members of the Fund, as well as the Italian branches of EU Cooperative Banks with the purpose of supplementing the deposit protection provided by their home country schemes. Non-EU banks authorized to do business in Italy shall also be members of the Fund, unless they are members of a foreign deposit protection scheme which is deemed equivalent by the Bank of Italy. 2. Members under special administration shall maintain their membership and shall be allowed to take part in the Assembly. However, voting rights shall be withheld. While under special administration, such members shall not concur in intervention expenditures and shall be excluded from the calculation of the contribution quotas relating to the said interventions. 3. As a consequence to their participation in the Fund, member banks are subject to the observance of all legislative and regulatory provisions governing their organization and activities, as well as to all. dispositions included in these Statutes and By-laws, and to all deliberations enacted by the Board. and the Executive Committee according to these Statutes and By-laws. 4. The Fund has the right to participate and intervene, with their own representatives, in the assemblies of the Bank Members to which the proceeding interventions are currently addressed, concerning the corporate aspects regarding the interventions themselves. To that object, the Members, contextually to the convocation of the assembly according to the statute, send an appropriate notice to the Fund containing the agenda for the meeting and any other relevant information in order to allow the Fund to participate. 5. Membership in the Fund is regulated by the By-laws. 6. The Fund shall compensate, up to the limits laid down in these Statutes, the depositors of member banks, those of foreign branches in European Union countries, and those of the Italian branches of EU and non-EU members. The Fund shall also compensate the depositors of Italian member banks branches in non-EU countries which have deposit protection schemes, when such schemes do not allow membership to the said branches. In this case, the Funds compensation shall be provided only up to the levels of protection set by said schemes and, in any case, no more than that provided for in these Statutes.