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 Dhanashri Mahila Sahakari Bank Ltd., Miraj, Dist. Sangli, Maharashtra after determining that the bank had ceased to be solvent and that its financial condition had deteriorated sharply. RBI stated that attempts to revive the bank in consultation with the Government of Maharashtra had failed, the bank had no concrete revival or merger plan, and its reply to the statutory show-cause notice was unsatisfactory. The cancellation followed earlier all-inclusive directions under Section 35A of the Banking Regulation Act, 1949 (as applicable to co-operative societies), which had capped withdrawals at Rs. 1,000. RBI requested the Registrar of Co-operative Societies, Maharashtra to initiate winding up and appoint a liquidator. Following cancellation, the bank is prohibited from carrying on banking business, including accepting and repaying deposits, and depositors’ claims will be processed subject to the Deposit Insurance Scheme and DICGC limits.
Why RBI Acted
RBI cancelled the licence of Dhanashri Mahila Sahakari Bank Ltd., Miraj, Dist. Sangli, Maharashtra after concluding that the bank had ceased to be solvent, its financial position had deteriorated severely, efforts to revive it in consultation with the Government of Maharashtra had failed, and there was no concrete revival or merger proposal. The bank had been served a show-cause notice under Section 22 of the Banking Regulation Act, 1949 (as applicable to co-operative societies), and its reply was found unsatisfactory. RBI also noted that the bank was already under all-inclusive directions under Section 35A with a withdrawal ceiling of Rs. 1,000, and that cancellation was being done in the interest of depositors; winding-up and liquidation proceedings were to follow.
Operating Impact
The bank can no longer conduct banking business, accept deposits, or repay deposits except through the liquidation and deposit insurance process. Depositors will have to claim repayment subject to DICGC terms and the Rs. 1,00,000 insurance ceiling, while the co-operative registrar is expected to commence winding-up and appoint a liquidator.
Regulatory Basis
- Section 35A of the Banking Regulation Act 1949 (As Applicable to Co-operative Societies)
- Section 22 of the Banking Regulation Act, 1949 (As Applicable to Co-operative Societies)
- Section 5(b) of the Banking Regulation Act, 1949 (As applicable to Co-operative Societies)
Action Facts
- Primary Impact
- License cancellation
- Order Date
- 12 Mar 2010
- Effective From
- 12 Mar 2010
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank