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Rajiv Gandhi Sahakari Bank Ltd., Latur (Maharashtra)

Co-operative bankLatur, Maharashtra

The RBI action, regulatory basis, and operating impact linked to this entity.

Recorded RBI impact

License cancellation

License cancellation · Fresh imposition

S5

Published by RBI

12 Sept 2012

Case Brief

RBI cancelled the banking licence of Rajiv Gandhi Sahakari Bank Ltd., Latur (Maharashtra) after concluding that the bank could not pay its present and future depositors and that its financial condition left no scope for revival. The release cites repeated statutory inspections showing worsening net worth, CRAR, NPAs, losses and deposit erosion, along with non-compliance with provisions of the Banking Regulation Act, 1949 (AACS). RBI also noted that no satisfactory reply or concrete merger/revival proposal was received. Consequent to the cancellation, RBI requested the Registrar of Co-operative Societies, Pune to issue winding-up orders and appoint a liquidator, and deposit insurance payments up to the statutory ceiling were to be set in motion.

Why RBI Acted

Capital & exposure normsGovernance oversightCustomer protectionLicensing breach

Following statutory inspections, RBI found severe deterioration in the bank’s financial position, including negative net worth, weak capital adequacy, high NPAs, accumulated losses and significant deposit erosion. The bank did not comply with several provisions of the Banking Regulation Act, 1949 (AACS), was not in a position to pay its depositors, and had no concrete revival or merger proposal; RBI therefore cancelled its licence under Section 22 and moved for liquidation.

Operating Impact

The bank cannot continue carrying on banking business and liquidation proceedings are to commence. Depositors will be entitled to insured repayment up to the applicable DICGC ceiling, subject to the scheme’s terms and conditions; the action directly affects the bank, its depositors, and the liquidation process.

Regulatory Basis

  • Section 22 of the Banking Regulation Act, 1949 (As Applicable to Cooperative Societies)
  • Section 35 of the Banking Regulation Act, 1949 (AACS)
  • Section 36 (1) of the Banking Regulation Act, 1949
  • Section 35A of the Banking Regulation Act, 1949
  • Sections 11(1) and 22(3) of B. R. Act
  • Sections 11(1), 18, 22 (3) (a), 22 (3) (b) and 24 of the B. R. Act

Action Facts

Primary Impact
License cancellation
Order Date
30 Aug 2012
Effective From
30 Aug 2012
Entities Affected
1
Entity Role
Primary
Entity Type
Co-operative bank