Recorded RBI impact
License cancellation
License cancellation · Fresh imposition
Published by RBI
23 Feb 2010
Case Brief
The Reserve Bank of India cancelled the banking licence of Ichalkaranji Urban Co-operative Bank Ltd., Ichalkaranji, Kolhapur, Maharashtra with effect after the close of business on February 11, 2010. RBI said the bank had ceased to be solvent, its condition had continued to deteriorate across successive inspections, and liquidity problems had made its financial position precarious. After issuing Section 35A directions restricting operations and later a show-cause notice, RBI found no viable revival plan or concrete merger proposal. RBI also requested the Registrar of Co-operative Societies, Maharashtra to order winding up and appoint a liquidator. Consequent to cancellation, the bank was prohibited from carrying on banking business, including acceptance and repayment of deposits, and depositors would be entitled to repayment subject to DICGC terms and conditions.
Why RBI Acted
RBI cancelled the licence of Ichalkaranji Urban Co-operative Bank Ltd., Ichalkaranji, Kolhapur, Maharashtra because the bank had ceased to be solvent, repeated inspections showed worsening financial condition, and a scrutiny had revealed precarious finances. RBI had already issued Section 35A directions restricting operations, then issued a show-cause notice asking why the licence should not be cancelled. After examining the reply, RBI found no viable revival plan, no concrete merger proposal, and concluded that the possibility of revival was remote, so it took the extreme measure of cancelling the licence in the interest of depositors. RBI also requested the Registrar of Co-operative Societies, Maharashtra to initiate winding up and appoint a liquidator.
Operating Impact
The bank cannot continue banking business or accept or repay deposits. Winding up and liquidation proceedings are to begin, and depositor repayments will proceed subject to the deposit insurance scheme and applicable ceiling. The immediate effect is on the bank, its depositors, and the liquidation process; depositors may recover only up to the insured limit under usual conditions.
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
- 11 Feb 2010
- Effective From
- 11 Feb 2010
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank