Recorded RBI impact
License cancellation
License cancellation · Fresh imposition
Published by RBI
8 Mar 2013
Case Brief
The Reserve Bank of India cancelled the licence of Abhinav Sahakari Bank Ltd., Rahuri, Maharashtra, with effect from the close of business on February 07, 2013. RBI said the bank had ceased to be solvent, all revival efforts had failed, and continuing the bank’s operations would be prejudicial to depositors and public interest. The release records a long history of deterioration in financial condition, including very low CRAR, high NPAs, erosion of capital and deposits, non-maintenance of CRR/SLR, violations of multiple provisions of the BR Act, 1949, breach of RBI directives and operational instructions, and an unsuccessful show-cause/revival process. RBI requested the Registrar of Co-operative Societies, Maharashtra to initiate winding-up and appoint a liquidator. It also noted that depositors would be entitled to insured repayment up to Rs 1,00,000 from DICGC under the applicable terms.
Why RBI Acted
The Reserve Bank cancelled the licence of Abhinav Sahakari Bank Ltd., Rahuri with effect from the close of business on February 07, 2013. RBI said the bank had ceased to be solvent, revival efforts in consultation with the Government of Maharashtra had failed, and the bank’s continued operations would prejudice the interests of present and future depositors. The release cites persistent deterioration in financial health since 2005, CRAR far below the regulatory minimum, erosion of owned funds and deposits, high NPAs, default in CRR/SLR maintenance, violations of sections 11(1), 18, 22(3)(a), 22(3)(b), 24, 23 and 31 of the BR Act, 1949, breach of prudential exposure ceilings, violation of all-inclusive directions/operational instructions, and an unsatisfactory revival plan. RBI also issued a show-cause notice and concluded the bank could not pay present and future depositors.
Operating Impact
The bank cannot carry on banking business any further and will proceed toward liquidation. Depositors will be paid insurance cover up to Rs 1,00,000 subject to DICGC scheme conditions, while any remaining claims depend on the liquidation process. The action directly affects the bank, its depositors, and the liquidator/regulator process.
Regulatory Basis
- Section 35A of the B.R. Act, 1949
- section 22 of the BR Act, 1949
- Sections 11(1), 18, 22(3)(a), 22(3)(b) and 24 of the BR Act, 1949
- sections 23 and 31 of the B.R. Act, 1949
- Section 5(b) of the Act ibid
Action Facts
- Primary Impact
- License cancellation
- Order Date
- 7 Feb 2013
- Effective From
- 17 Apr 2012
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank