Recorded RBI impact
License cancellation
License cancellation · Fresh imposition
Published by RBI
29 Mar 2010
Case Brief
The Reserve Bank of India cancelled the banking licence of Champavati Urban Co-operative Bank Ltd., Beed (Maharashtra) on March 20, 2010 at 10:30 a.m. RBI said the bank had ceased to be solvent, revival attempts in consultation with the Government of Maharashtra had failed, and depositors were being inconvenienced by the continued uncertainty. The statutory inspection as of March 31, 2008 revealed large-scale irregularities in the bank's operations, and a subsequent inspection as of March 31, 2009 showed that the financial position had deteriorated further. After a show-cause notice dated November 23, 2009 and an unsatisfactory reply from the bank on December 23, 2009, RBI cancelled the licence in the interest of depositors and requested the Registrar of Co-operative Societies, Maharashtra to order winding up and appoint a liquidator. RBI also noted that depositors would be entitled to repayment up to Rs.1,00,000 through DICGC, subject to applicable terms and conditions.
Why RBI Acted
RBI cancelled the licence of Champavati Urban Co-operative Bank Ltd., Beed, after concluding that the bank had ceased to be solvent, efforts to revive it in consultation with the Government of Maharashtra had failed, and continued uncertainty was inconveniencing depositors. The statutory inspection as of March 31, 2008 found large-scale irregularities in the bank's operations; a later inspection as of March 31, 2009 showed further deterioration. RBI issued a show-cause notice on November 23, 2009 under section 22 of the Banking Regulation Act, 1949 (as applicable to co-operative societies), but the bank's reply dated December 23, 2009 did not provide any viable action plan for revival, leading RBI to take the extreme step of cancelling the licence and initiating liquidation.
Operating Impact
The bank must cease banking operations, including acceptance and repayment of deposits, and liquidation proceedings are to begin. Depositors will be protected only to the extent of DICGC insurance coverage up to Rs.1,00,000, subject to the insurer's terms and conditions. The Registrar of Co-operative Societies, Maharashtra is expected to order winding up and appoint a liquidator.
Regulatory Basis
- Section 22 of the Banking Regulation Act, 1949 (As Applicable to Cooperative Societies)
- Section 5(b) of the Banking Regulation Act, 1949 (As Applicable to Cooperative Societies)
Action Facts
- Primary Impact
- License cancellation
- Order Date
- 20 Mar 2010
- Effective From
- 20 Mar 2010
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank