Recorded RBI impact
License cancellation
License cancellation · Fresh imposition
Published by RBI
27 May 2013
Case Brief
RBI cancelled the banking licence of Arjun Urban Co-operative Bank Ltd., Solapur, Maharashtra, effective from the close of business on May 21, 2013. The order was issued because the bank had ceased to be solvent, revival efforts had failed, and the bank’s condition had deteriorated sharply over successive inspections. The release cites substantial losses, very high NPAs, negative net worth and CRAR, erosion in deposits, repeated defaults in SLR and CRR maintenance, preferential payment of deposits to a credit society, and violations of several provisions of the Banking Regulation Act. RBI also noted that the bank’s response to the show-cause notice was unsatisfactory. The Registrar of Co-operative Societies was asked to initiate winding up and appoint a liquidator, and depositors were informed that insured claims would be processed under the DICGC framework.
Why RBI Acted
RBI cancelled the licence of Arjun Urban Co-operative Bank Ltd., Solapur, Maharashtra under section 22 of the Banking Regulation Act, 1949 after concluding that the bank had ceased to be solvent and that efforts to revive it in consultation with the Government of Maharashtra had failed. The release cites severe deterioration in financial health, including heavy losses, very high gross and net NPAs, negative net worth and CRAR, erosion in deposits, repeated defaults in SLR and CRR maintenance, preferential payment of deposits to a credit society, and non-compliance with sections 9, 11(1), 18, 22(3)(a), 22(3)(b) and 24 of the Act. The bank’s reply to the show-cause notice was found unsatisfactory, and RBI cancelled the licence in the interest of depositors; liquidation proceedings were also initiated/asked for.
Operating Impact
The bank can no longer carry on banking business and moves into liquidation proceedings. Depositors will receive insured amounts subject to DICGC terms and conditions, up to the statutory ceiling, while any further recovery depends on the liquidation process.
Regulatory Basis
- section 35 of the Banking Regulation Act, 1949 (As Applicable to Co-operative Societies)
- section 35 A of the Act
- section 22 of the Act
- section 5(b) of the Act
Action Facts
- Primary Impact
- License cancellation
- Order Date
- 21 May 2013
- Effective From
- 21 May 2013
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank