Recorded RBI impact
License cancellation
License cancellation · Fresh imposition
Published by RBI
11 Dec 2008
Case Brief
The Reserve Bank of India ordered the cancellation of the licence of Bhavnagar Mercantile Co-operative Bank Ltd., Bhavnagar, effective after close of business on December 10, 2008. RBI said the bank had ceased to be solvent, revival efforts in consultation with the Government of Gujarat had failed, and the depositors were facing continued uncertainty. The bank had earlier been placed under directions, and its Board of Directors had been superseded; subsequent inspections showed the bank’s financial position remained unsound/precarious. After issuing a show-cause notice and examining the reply, RBI found no viable plan for revival or regulatory compliance and therefore cancelled the licence. RBI also asked the Registrar of Co-operative Societies, Gujarat to issue winding-up orders and appoint a liquidator. Consequent to cancellation, the bank is prohibited from carrying on banking business, including acceptance and repayment of deposits, and depositor repayment will proceed under the Deposit Insurance Scheme subject to applicable terms and conditions.
Why RBI Acted
The Reserve Bank of India cancelled the licence of Bhavnagar Mercantile Co-operative Bank Ltd., Bhavnagar after concluding that the bank had ceased to be solvent and that efforts to revive it, in consultation with the Government of Gujarat, had failed. RBI noted that the bank’s financial position had been impaired/precarious in successive inspections, the Board had earlier been superseded, and the bank had no viable plan of action to restore regulatory compliance. The cancellation was taken in the interest of depositors, and the Registrar of Co-operative Societies, Gujarat was requested to initiate winding-up and appoint a liquidator.
Operating Impact
The bank must cease all banking business immediately upon cancellation, including accepting or repaying deposits, and liquidation proceedings are to begin. Depositors will have claims processed through the winding-up/liquidation framework and may be entitled to insurance-backed repayment up to the applicable DICGC ceiling, subject to scheme conditions. البنك/its stakeholders are affected by the shutdown, while the Registrar of Co-operative Societies and liquidator handle the winding-up process.
Regulatory Basis
- Section 5(b) of the Banking Regulation Act, 1949 (AACS)
Action Facts
- Primary Impact
- License cancellation
- Order Date
- 10 Dec 2008
- Effective From
- 10 Dec 2008
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank