Recorded RBI impact
License cancellation
License cancellation · Fresh imposition
Published by RBI
20 Apr 2010
Case Brief
The Reserve Bank of India cancelled the licence of Rajeshwar Yuvak Vikas Sahakari Bank Ltd., Satara, Maharashtra, effective after the close of business on April 8, 2010. RBI said the bank had ceased to be solvent, revival efforts with the Government of Maharashtra had failed, and the bank lacked a viable plan to turn around. A statutory inspection as of March 31, 2009 showed the bank’s financial position was impaired, and Section 35A directions restricting its operations had already been issued from November 16, 2009. After issuing and examining a show-cause notice, RBI concluded that the possibility of revival was remote and cancelled the licence in the interest of depositors. The Registrar of Co-operative Societies, Maharashtra was asked to initiate winding up and appoint a liquidator. Consequent to the cancellation, the bank is prohibited from carrying on banking business, including acceptance and repayment of deposits, and depositors’ claims will move through liquidation subject to DICGC terms.
Why RBI Acted
RBI cancelled the banking licence of Rajeshwar Yuvak Vikas Sahakari Bank Ltd., Satara after the close of business on April 8, 2010. The release says the bank had ceased to be solvent, efforts to revive it in consultation with the Government of Maharashtra had failed, and the bank did not have a viable plan of action for revival. A statutory inspection as of March 31, 2009 had indicated impaired financial position, and the bank had earlier been placed under Section 35A directions restricting operations from November 16, 2009. RBI issued a show-cause notice on November 30, 2009 and, after examining the reply, concluded that revival was remote and cancelled the licence in the interest of depositors. Winding-up and liquidation proceedings were also requested.
Operating Impact
The bank can no longer carry on banking business or accept and repay deposits. Liquidation proceedings will begin, and depositors will be paid subject to DICGC rules and the prescribed ceiling; other stakeholders will be affected through the winding-up process.
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
- 8 Apr 2010
- Effective From
- 8 Apr 2010
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank