Recorded RBI impact
License cancellation
License cancellation · Fresh imposition
Published by RBI
7 Jul 2009
Case Brief
The Reserve Bank of India cancelled the banking licence of Prantij Nagrik Sahakari Bank Ltd., Prantij, Gujarat, effective after the close of business on June 30, 2009. RBI said the bank had ceased to be solvent, its affairs were being conducted in a manner detrimental to the interests of depositors, and depositors faced continued uncertainty. Earlier statutory inspections indicated that the bank’s financial position was impaired and that it had violated RBI directives and guidelines; later inspections showed further deterioration and continued violations. After an unsatisfactory reply to a show-cause notice dated February 5, 2009, RBI took the extreme measure of cancelling the licence and requested the Registrar of Co-operative Societies, Gujarat to initiate winding up and appoint a liquidator.
Why RBI Acted
RBI cancelled the licence of Prantij Nagrik Sahakari Bank Ltd., Prantij after concluding that the bank had ceased to be solvent, the affairs of the bank were being conducted in a manner detrimental to the interests of depositors, and depositors were being inconvenienced by continued uncertainty. The release also notes that statutory inspections as on December 31, 2004, March 31, 2006 and March 31, 2007 showed impaired and deteriorating financial condition and continuing violations of RBI’s directives and guidelines. A show-cause notice was issued on February 5, 2009, but the reply was not found satisfactory, leading RBI to take the extreme step of cancelling the banking licence and initiating liquidation proceedings.
Operating Impact
The bank cannot carry on banking business, including acceptance and repayment of deposits. Liquidation proceedings are to begin, and depositors may claim repayment up to Rs. 1,00,000 from DICGC subject to the scheme’s terms and conditions. The effective date of the cancellation was after close of business on June 30, 2009.
Regulatory Basis
- Section 5(b) of the Banking Regulation Act, 1949 (AACS)
Action Facts
- Primary Impact
- License cancellation
- Order Date
- 30 Jun 2009
- Effective From
- 30 Jun 2009
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank