Case Brief
What Happened
On November 17, 2005, the Reserve Bank of India rejected the licence application of Kotagiri Co-operative Urban Bank Ltd., Kotagiri, Tamil Nadu. RBI said the bank had ceased to be solvent, its financial position had deteriorated over time, and all efforts to revive it had failed. The bank had earlier been advised to go out of the purview of the Banking Regulation Act, 1949 (AACS), but had not done so, and a statutory inspection showed continued deterioration, including negative capital and reserves. After issuing a show cause notice under Section 22 and finding no viable revival plan, RBI rejected the licence in order to protect depositors’ interests and requested winding-up and appointment of a liquidator. The release also states that, consequent to the rejection, the bank is prohibited from carrying on banking business, including acceptance and repayment of deposits.