Recorded RBI impact
License cancellation
License cancellation · Fresh imposition
Published by RBI
5 Aug 2010
Case Brief
The Reserve Bank of India cancelled the banking licence of Belgaum Catholic Co-operative Bank Ltd., Belgaum (Karnataka) after concluding that the bank had ceased to be solvent and that all efforts to revive it had failed. RBI noted that earlier statutory inspections showed worsening financial health, and the bank had already been placed under Section 35A directions restricting loans and advances, investments, borrowings, fresh deposits, and imposing a withdrawal cap. The bank also failed to submit a viable revival or merger proposal in response to the show-cause notice. RBI requested the Registrar of Co-operative Societies, Karnataka to initiate winding up and appoint a liquidator.
Why RBI Acted
After statutory inspections found several disquieting features and further deterioration in the bank’s financial position, RBI had already placed the bank under Section 35A directions restricting lending, investments, borrowings and fresh deposits, with a cap on withdrawals. The bank later became insolvent, revival efforts in consultation with the Government of Karnataka failed, and the bank did not furnish any viable plan for revival or merger. RBI therefore cancelled the licence in the interest of depositors and requested winding up and appointment of a liquidator.
Operating Impact
The bank can no longer carry on banking business, including accepting or repaying deposits. Liquidation proceedings will begin, and depositors will rely on the DICGC insurance mechanism for repayment up to the applicable statutory ceiling; the bank’s depositors, creditors, and counterparties are affected. The cancellation took effect after close of business on August 03, 2010.
Regulatory Basis
- Section 35A of the Act
- Section 5(b) of the Banking Regulation Act, 1949(AACS)
Action Facts
- Primary Impact
- License cancellation
- Order Date
- 3 Aug 2010
- Effective From
- 3 Aug 2010
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank