Recorded RBI impact
License cancellation
License cancellation · Fresh imposition
Published by RBI
23 Nov 2005
Case Brief
The Reserve Bank of India cancelled the licence of Natpur Co-operative Bank Ltd., Nadiad, Gujarat on 22 November 2005 at 12:00 noon. RBI said the bank had ceased to be solvent, that revival efforts in consultation with the Government of Gujarat had failed, and that the bank’s financial condition had deteriorated severely, with deposits being eroded and paid-up capital and reserves in the negative. The bank had earlier been placed under Section 35A directions on 16 January 2002 because of a severe liquidity crunch, and a show-cause notice was issued on 18 December 2004. As no viable revival plan existed and the prospects of revival were remote, RBI cancelled the licence as a final step to protect depositors, and requested the Registrar of Co-operative Societies, Gujarat to initiate winding-up and appoint a liquidator. The release also notes that after liquidation, depositors would be entitled to DICGC insurance up to Rs. 1,00,000.
Why RBI Acted
RBI cancelled the banking licence of Natpur Co-operative Bank Ltd., Nadiad, Gujarat, after the bank was found to have ceased to be solvent, with all revival efforts in consultation with the Government of Gujarat failing. The release says the bank was under Section 35A directions from 16 January 2002 due to a severe liquidity crunch, and inspection as of 30 June 2004 showed deterioration in financial condition, eroding deposits, and negative paid-up capital and reserves. RBI issued a show-cause notice on 18 December 2004, but since there was no viable revival plan and chances of revival were remote, it took the extreme measure of cancelling the licence in the interest of depositors. The Registrar of Co-operative Societies, Gujarat was requested to wind up the bank and appoint a liquidator.
Operating Impact
The bank can no longer carry on banking business, including acceptance and repayment of deposits. Liquidation proceedings are to begin, and depositors will have claims through DICGC up to the insured ceiling of Rs. 1,00,000, while any further recovery depends on the liquidation 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
- 22 Nov 2005
- Effective From
- 16 Jan 2002
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank