Recorded RBI impact
License cancellation
License cancellation · Fresh imposition
Published by RBI
18 Dec 2008
Case Brief
The Reserve Bank of India cancelled the banking licence of Goregaon Co-operative Urban Bank Ltd., Goregaon, District Raigad, Maharashtra, after concluding that the bank had ceased to be solvent and had no viable revival plan. RBI said statutory inspection showed its financial position was impaired, supervisory action had been initiated earlier, and efforts to revive the bank in consultation with the Government of Maharashtra had failed. As a consequence, the Registrar of Co-operative Societies, Maharashtra was requested to initiate winding-up and appoint a liquidator. RBI also reiterated that, following cancellation, the bank is prohibited from carrying on banking business, including acceptance and repayment of deposits, and that depositor repayment would proceed under the Deposit Insurance Scheme subject to its terms and conditions.
Why RBI Acted
RBI cancelled the licence of Goregaon Co-operative Urban Bank Ltd. after finding that the bank had ceased to be solvent, its financial position was impaired in statutory inspection, and efforts to revive it in consultation with the Government of Maharashtra had failed. RBI also noted that the bank did not have any viable plan of action for revival and that the possibility of turnaround was remote, so it took the extreme measure of cancelling the licence and initiating liquidation proceedings. The bank was earlier placed under Section 35A directions restricting operations, including a ceiling on deposit withdrawals of Rs. 1,000.
Operating Impact
The bank can no longer carry on banking business or accept/repay deposits, and liquidation proceedings will begin. Depositors will be paid subject to deposit insurance limits and conditions, with repayment up to Rs. 1 lakh per depositor mentioned in the release. The earlier Section 35A withdrawal cap is superseded by the licence cancellation and liquidation process.
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
- 2 Dec 2008
- Effective From
- 2 Dec 2008
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank