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Bhandari Co-operative Bank Ltd., Mumbai (Maharashtra)

Co-operative bankMumbai, Maharashtra

The RBI action, regulatory basis, and operating impact linked to this entity.

Recorded RBI impact

License cancellation

License cancellation · Fresh imposition

S5

Published by RBI

16 Nov 2011

Case Brief

The Reserve Bank of India cancelled the licence of Bhandari Co-operative Bank Ltd., Mumbai (Maharashtra), effective as of the close of business on November 11, 2011. RBI said the bank had ceased to be solvent, revival attempts in consultation with the Maharashtra government had failed, and the bank's deteriorating condition was harming depositors. The release cites negative net worth, negative CRAR, deposit erosion, high NPAs, fraudulent auto-rickshaw and housing loans, ineffective management and board oversight, and non-compliance with statutory provisions under the Banking Regulation Act. A show-cause notice had been issued earlier, but the bank's response was not satisfactory. Following cancellation, the Registrar of Co-operative Societies was requested to initiate winding up and appoint a liquidator, and the bank was prohibited from carrying on banking business.

Why RBI Acted

Governance oversightLending normsReporting & disclosureCustomer protectionLicensing breach

RBI cancelled the licence of Bhandari Co-operative Bank Ltd., Mumbai (Maharashtra) as the bank had ceased to be solvent, efforts to revive it had failed, and continued uncertainty was inconveniencing depositors. The release cites severe deterioration in financial condition, negative net worth and CRAR, significant deposit erosion, high NPAs, fraudulent auto-rickshaw/housing loan transactions, non-compliance with Sections 11(1), 22(3)(a) and 22(3)(b) of the Banking Regulation Act, and a finding that the affairs of the bank were being conducted in a manner detrimental to depositors' interests. A show-cause notice was issued and the bank's reply was not found satisfactory before the licence was cancelled and liquidation proceedings initiated.

Operating Impact

The bank loses its licence and must cease banking operations; liquidation proceedings are to begin. Depositors will be paid insured amounts up to the DICGC limit subject to the scheme's terms and conditions, and the bank can no longer accept deposits or conduct banking business.

Regulatory Basis

  • Section 35A of the Banking Regulation Act, 1949
  • Section 11(1)
  • Section 22(3)(a)
  • Section 22(3)(b)
  • Section 5(b) of the Act

Action Facts

Primary Impact
License cancellation
Order Date
11 Nov 2011
Effective From
11 Nov 2011
Entities Affected
1
Entity Role
Primary
Entity Type
Co-operative bank