Recorded RBI impact
License cancellation
License cancellation · Fresh imposition
Published by RBI
31 Dec 2007
Case Brief
The Reserve Bank of India cancelled the licence of Dakor Mahila Nagarik Sahakari Bank Ltd., Dakor, Gujarat, after determining that the bank had ceased to be solvent and that all revival efforts in consultation with the Government of Gujarat had failed. RBI noted deterioration in the bank’s financial condition, negative realizable value of paid-up capital and reserves, and further deterioration in asset quality, along with a liquidity crunch. Earlier, the bank had been placed under Section 35A directions effective from close of business on July 31, 2007, prohibiting acceptance of fresh deposits and fresh loans and capping repayment of deposits at Rs. 1,000 per deposit account. RBI had also issued a show-cause notice on August 16, 2007. Following the cancellation, RBI requested the Registrar of Co-operative Societies, Gujarat to initiate winding up and appoint a liquidator. The release also notes that depositors would be entitled to DICGC coverage up to Rs. 1,00,000 subject to usual terms and conditions.
Why RBI Acted
RBI cancelled the licence of Dakor Mahila Nagarik Sahakari Bank Ltd., Dakor, Gujarat after concluding that the bank had ceased to be solvent, its financial condition had deteriorated, and realizable value of paid-up capital and reserves was negative. Subsequent inspection showed further deterioration in asset quality and liquidity crunch. The bank was earlier placed under Section 35A directions from close of business on July 31, 2007, restricting it from accepting fresh deposits, granting fresh loans, and limiting repayment of deposits to Rs. 1,000 per deposit account. A show-cause notice was also issued on August 16, 2007. As the bank had no viable revival plan and revival chances were remote, RBI 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, and liquidation proceedings will begin. Depositors will have claims processed under the deposit insurance scheme, subject to DICGC limits and conditions.
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
- 29 Dec 2007
- Effective From
- 31 Jul 2007
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank