Recorded RBI impact
License cancellation
License cancellation · Fresh imposition
Published by RBI
12 Mar 2010
Case Brief
The Reserve Bank of India cancelled the licence of Rabkavi Urban Co-operative Bank Ltd., Rabkavi (Karnataka) after concluding that the bank had ceased to be solvent and that all efforts to revive it had failed. RBI cited deteriorating and precarious financial condition, lack of a viable revival plan, and the need to protect depositors. Consequent to the cancellation, the Registrar of Co-operative Societies, Karnataka was requested to initiate winding up and appoint a liquidator, and deposit insurance payout processing under DICGC was to begin.
Why RBI Acted
The RBI cancelled the banking licence of Rabkavi Urban Co-operative Bank Ltd., Rabkavi (Karnataka) after concluding that the bank had ceased to be solvent, efforts to revive it in consultation with the Government of Karnataka had failed, and continued uncertainty was inconveniencing depositors. Earlier inspections showed significant deterioration and later precarious financial position. A show-cause notice issued under section 22 was not met with any viable revival plan, so RBI took the extreme measure of licence cancellation in the interest of depositors and initiated liquidation proceedings.
Operating Impact
The bank can no longer carry on banking business, including acceptance and repayment of deposits. Winding-up and liquidation proceedings are to follow, and insured depositor claims up to Rs.1,00,000 per depositor will be processed through DICGC. Deposit access is therefore limited to the liquidation/insurance process rather than normal banking operations.
Regulatory Basis
- section 35A of the Act
- section 22 of the Act
- Section 5(b) of the Banking Regulation Act, 1949(AACS)
Action Facts
- Primary Impact
- License cancellation
- Order Date
- 9 Mar 2010
- Effective From
- 9 Mar 2010
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank