Case Brief
What Happened
The Reserve Bank of India cancelled the licence of The Century Co-operative Bank Ltd., Surat, Gujarat, on June 7, 2005, because it had ceased to be solvent. RBI cited prior inspection findings that the bank had sanctioned large temporary overdrafts and unsecured advances, including unsecured advances in current accounts, in violation of its directives. The bank also failed to meet its clearing liability, was suspended from the Surat Clearing House, and later was found to have severely impaired financial parameters, negative net worth and CRAR, and a significant erosion of deposits. After an unsatisfactory reply to a show-cause notice dated February 4, 2005, RBI cancelled the licence in the interest of depositors and requested winding up and appointment of a liquidator. Following cancellation, the bank is prohibited from carrying on banking business, including acceptance and repayment of deposits; depositors are to be paid insured amounts under the DICGC mechanism during liquidation.