Recorded RBI impact
License cancellation
License cancellation · Fresh imposition
Published by RBI
29 Mar 2010
Case Brief
The Reserve Bank of India cancelled the licence of Hina Shahin Co-operative Urban Bank Ltd., Beed, Maharashtra, effective March 23, 2010 at 5:00 p.m. RBI said the bank had ceased to be solvent, efforts to revive it in consultation with the Government of Maharashtra had failed, and depositors were facing continued uncertainty. Inspections showed the bank’s financial position had become adverse and then deteriorated further; its Board had earlier been superseded, and a show-cause notice issued under section 22 of the Banking Regulation Act, 1949 (as applicable to cooperative societies) did not yield a satisfactory response or a viable action plan. RBI also noted negative realizable value of paid-up capital and reserves and concluded that revival prospects were remote. The Registrar of Co-operative Societies, Maharashtra was asked to initiate winding up and appoint a liquidator. Upon liquidation, depositors are entitled to DICGC insurance coverage up to Rs. 1,00,000, subject to applicable terms and conditions.
Why RBI Acted
RBI cancelled the licence of Hina Shahin Co-operative Urban Bank Ltd., Beed, Maharashtra, because the bank had ceased to be solvent, efforts to revive it had failed, and depositors were being inconvenienced by continued uncertainty. A statutory inspection with reference to financial position as on March 31, 2008 found the financial position adverse; a later inspection as on March 31, 2009 showed it had deteriorated further. The bank’s Board had earlier been superseded, a show-cause notice was issued on November 17, 2009 under section 22 of the Banking Regulation Act, 1949 (as applicable to cooperative societies), and the bank’s reply and revival plan were found unsatisfactory. RBI noted that paid-up capital and reserves had negative realizable value and the chances of revival were remote, so it cancelled the licence and initiated liquidation; the Registrar of Co-operative Societies was requested to wind up the bank and appoint a liquidator.
Operating Impact
The bank can no longer carry on banking business, including accepting or repaying deposits, and liquidation proceedings will proceed. Depositors will rely on DICGC coverage up to Rs. 1,00,000, subject to the insurer’s terms and the liquidation process.
Regulatory Basis
- Section 22 of the Act
- Section 5(b) of the Banking Regulation Act, 1949 (As Applicable to Cooperative Societies)
Action Facts
- Primary Impact
- License cancellation
- Order Date
- 23 Mar 2010
- Effective From
- 23 Mar 2010
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank