Recorded RBI impact
License cancellation
License cancellation · Fresh imposition
Published by RBI
12 Mar 2010
Case Brief
The Reserve Bank of India cancelled the banking licence of Annasaheb Patil Urban Co-operative Bank Ltd., Aurangabad (Maharashtra), effective before commencement of business on March 9, 2010, after concluding that the bank had ceased to be solvent and that efforts to revive it had failed. RBI noted that the bank’s financial condition had been adverse for several years, that the realizable value of paid-up capital and reserves was negative, and that the chances of revival were remote. The bank’s statutory inspection also revealed non-compliance with several provisions of the Banking Regulation Act, 1949 (as applicable to co-operative societies) and violations of RBI guidelines/instructions. RBI had earlier issued a show-cause notice under Section 22 of the Banking Regulation Act, 1949, but found the reply unacceptable. Consequent to the cancellation, the Registrar of Co-operative Societies, Maharashtra was requested to order winding up and appoint a liquidator, and depositors would be entitled to insurance coverage up to Rs. 1 lakh under DICGC, subject to applicable terms and conditions.
Why RBI Acted
RBI cancelled the banking licence of Annasaheb Patil Urban Co-operative Bank Ltd., Aurangabad, after concluding that the bank had ceased to be solvent, revival efforts in consultation with the Government of Maharashtra had failed, and continued uncertainty was inconveniencing depositors. The bank had been under review for years; inspections showed an adverse and deteriorating financial position, negative realizable value of paid-up capital and reserves, remote chances of revival, non-compliance with several provisions of the Banking Regulation Act, 1949 (as applicable to co-operative societies), and violations of RBI guidelines/instructions. The action was taken under Section 22 of the Banking Regulation Act, 1949, and the Registrar of Co-operative Societies was asked to initiate winding-up and appoint a liquidator.
Operating Impact
The bank can no longer conduct banking business, including accepting or repaying deposits, and liquidation proceedings will proceed. Depositors will be paid insured amounts up to the statutory DICGC ceiling, and the winding-up/liquidation process affects all account holders and creditors.
Regulatory Basis
- Section 22 of the Banking Regulation Act, 1949 (As Applicable to Cooperative Societies)
- Section 5(b) of the Banking Regulation Act, 1949 (As Applicable to Cooperative Societies)
Action Facts
- Primary Impact
- License cancellation
- Order Date
- 9 Mar 2010
- Effective From
- 9 Mar 2010
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank