Recorded RBI impact
License cancellation
License cancellation · Fresh imposition
Published by RBI
29 Jan 2015
Case Brief
RBI cancelled the licence of Baranagar Co-operative Bank Ltd., Kolkata (West Bengal), effective from the close of business on January 21, 2015. The Registrar of Co-operative Societies, West Bengal was asked to initiate winding-up proceedings and appoint a liquidator. RBI said the bank had become insolvent, could not meet its liabilities to depositors, and had no realistic prospect of revival, with its operations being carried out in a manner detrimental to depositors and the public in violation of Sections 11 and 22(3) of the BR Act. The bank had also been under all-inclusive directions under Section 35A since July 30, 2013, which were extended thrice, before RBI issued a show-cause notice on August 20, 2014 and ultimately decided to cancel the licence. As a result, the bank is prohibited from carrying on banking business, including acceptance and repayment of deposits, and liquidation/deposit insurance processes under the DICGC Act will commence.
Why RBI Acted
RBI cancelled the licence of Baranagar Co-operative Bank Ltd., Kolkata (West Bengal) with effect from the close of business on January 21, 2015. The cancellation was based on the bank having ceased to be solvent, being unable to pay present and future depositors in full as claims accrued, and having a financial position so precarious that revival was not feasible. RBI also cited that the bank’s operations were detrimental to the interests of present and future depositors and the public, in violation of Sections 11 and 22(3) of the BR Act, and that the bank continued to violate various provisions of the BR Act despite supervisory concerns and a show-cause notice. The release notes that all inclusive directions under Section 35A had been in place since July 30, 2013 and were extended thrice before the cancellation.
Operating Impact
The bank cannot conduct banking business or accept/repay deposits from the effective date. Liquidation will proceed, a liquidator may be appointed, and depositors will receive claims through DICGC up to the applicable insurance ceiling (stated as Rs 1,00,000), subject to usual terms and conditions.
Regulatory Basis
- Section 11
- Section 22(3)
- Section 5(b) of the Banking Regulation Act, 1949 (AACS)
- Section 35A of the BR Act
- Section 35 of the Banking Regulation (BR) Act, 1949 (AACS)
- Section 11(1) of the BR Act
- DICGC Act, 1961
Action Facts
- Primary Impact
- License cancellation
- Order Date
- 21 Jan 2015
- Effective From
- 21 Jan 2015
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank