Recorded RBI impact
License cancellation
License cancellation · Fresh imposition
Published by RBI
3 May 2006
Case Brief
The Reserve Bank of India cancelled the banking licence of Mahila Nagrik Sahkari Bank Maryadit, Khargone, Madhya Pradesh after concluding that the cooperative bank had ceased to be solvent and had no viable path to revival. RBI noted that the bank’s liquidity position was severely impaired, its paid-up capital and reserves had turned negative, and deposits were fully eroded. The bank had already been placed under section 35A directions in February 2004, which restricted repayment of deposits to Rs. 1,000 per depositor, and a show-cause notice was later issued in October 2005 before the final cancellation order was delivered after business hours on May 2, 2006. RBI also requested the Registrar of Co-operative Societies, Madhya Pradesh to initiate winding-up and appoint a liquidator. The release further notes that DICGC-insured deposit repayment would follow the cancellation and liquidation process.
Why RBI Acted
RBI cancelled the licence of Mahila Nagrik Sahkari Bank Maryadit, Khargone, Madhya Pradesh after finding that the bank had ceased to be solvent, revival attempts in consultation with the Government of Madhya Pradesh had failed, and continued uncertainty was inconveniencing depositors. The release says scrutiny revealed the bank’s liquidity position was severely impaired, its realisable paid-up capital and reserves were negative, and its deposits were fully eroded. RBI had earlier placed the bank under section 35A directions effective close of business on February 25, 2004, restricting repayment of deposits to Rs. 1,000 per depositor. A show-cause notice was issued on October 7, 2005, and after determining that no viable revival plan existed, RBI cancelled the licence and initiated liquidation proceedings.
Operating Impact
The bank can no longer carry on banking business, including acceptance and repayment of deposits, and liquidation proceedings will begin. Depositors will be paid insured amounts up to the DICGC ceiling of Rs. 1,00,000, while amounts beyond that remain subject to liquidation outcomes. The earlier withdrawal cap under section 35A is superseded by the licence cancellation and winding-up process.
Regulatory Basis
- Section 35A of the Banking Regulation Act, 1949(AACS)
- Section 5(b) of the Banking Regulation Act, 1949 (AACS)
Action Facts
- Primary Impact
- License cancellation
- Order Date
- 2 May 2006
- Effective From
- 25 Feb 2004
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank