Case Brief
What Happened
The Reserve Bank of India cancelled the licence of The Challakere Urban Co-operative Bank Ltd., Challakere (Karnataka) with effect after close of business on August 2, 2006. RBI said the bank had ceased to be solvent, revival attempts in consultation with the Government of Karnataka had failed, and the interests of depositors required action. The release also records that earlier statutory inspection and subsequent scrutiny revealed irregularities, liquidity problems, deterioration in the realizable value of capital and reserves, and full erosion of deposits. A show-cause notice issued under Section 22 of the Banking Regulation Act, 1949 (AACS) did not yield a satisfactory response, and RBI therefore cancelled the licence and sought winding up and appointment of a liquidator. As a result, the bank cannot carry on banking business, including accepting or repaying deposits, and depositor claims will be handled through liquidation and DICGC coverage up to the statutory ceiling.