Recorded RBI impact
License cancellation
License cancellation · Fresh imposition
Published by RBI
29 May 2009
Case Brief
The Reserve Bank of India cancelled the licence of Citizen Co-operative Bank Ltd., Burhanpur (M.P.) with effect after the close of business on May 27, 2009. RBI said the bank had ceased to be solvent, revival efforts in consultation with the Government of Madhya Pradesh had failed, and the bank’s continuing uncertainty was inconveniencing depositors. The release also notes that earlier statutory inspections had shown the bank’s financial position was impaired and later deteriorated further, and that a show-cause notice was issued on September 19, 2008 before the final decision. Because the bank had no viable turnaround plan and could not satisfy the required regulatory prescriptions, RBI cancelled the licence in the interest of depositors and asked the Registrar of Co-operative Societies, Madhya Pradesh to commence winding up and appoint a liquidator. The release also states that, on liquidation, depositor claims would be covered up to Rs. 1,00,000 under DICGC terms and conditions.
Why RBI Acted
RBI cancelled the banking licence of Citizen Co-operative Bank Ltd., Burhanpur (M.P.) after concluding that the bank had ceased to be solvent, efforts to revive it in consultation with the Government of Madhya Pradesh had failed, and depositors were being inconvenienced by continued uncertainty. The release states that statutory inspections showed the bank’s financial position was impaired and later deteriorated further, and that after a show-cause notice the bank could not present a viable plan of action for revival or to meet regulatory prescriptions. RBI therefore took the extreme step of cancelling the licence in the interest of depositors and requested the Registrar of Co-operative Societies, Madhya Pradesh to initiate winding up and appoint a liquidator. It also noted that, upon liquidation, depositors would be entitled to repayment up to Rs. 1,00,000 from DICGC under the deposit insurance scheme.
Operating Impact
Citizen Co-operative Bank Ltd., Burhanpur can no longer carry on banking business, including acceptance and repayment of deposits. Liquidation proceedings will begin, and depositors will receive claims processing subject to deposit insurance limits and conditions. Banks and counterparties dealing with it are affected by the cessation of banking operations.
Regulatory Basis
- Section 35 A of the Banking Regulation Act, 1949 (As applicable to Co-operative Societies)
- Section 5(b) of the Banking Regulation Act, 1949 (AACS)
Action Facts
- Primary Impact
- License cancellation
- Order Date
- 27 May 2009
- Effective From
- 15 Jan 2005
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank