Recorded RBI impact
License cancellation
License cancellation · Fresh imposition
Published by RBI
17 Sept 2008
Case Brief
The Reserve Bank of India cancelled the licence of Sant Janabai Nagari Sahakari Bank Ltd., Gangakhed, Parbhani, Maharashtra, on 5 September 2008. RBI said the bank had ceased to be solvent, earlier revival efforts with the Government of Maharashtra had failed, and the bank’s financial condition showed no scope for turnaround. The bank had previously been placed under Section 35A directions restricting operations and prohibiting withdrawals above Rs 500 because of its adverse liquidity position, but it failed to improve. RBI also initiated winding-up proceedings by requisitioning the Commissioner for Co-operation and Registrar of Co-operative Societies, Maharashtra, to issue an order for winding up and appoint a liquidator. After the cancellation, the bank was prohibited from carrying on banking business, including acceptance and repayment of deposits.
Why RBI Acted
The bank’s licence was cancelled on 5 September 2008 after RBI found that the bank had ceased to be solvent, efforts to revive it had failed, and there was no viable turnaround proposal or scope of revival. RBI had earlier issued Section 35A directions restricting operations and prohibiting withdrawals above Rs 500 due to the bank’s adverse liquidity position, but the bank did not improve. The cancellation was taken as a final step in the interest of depositors, and RBI also requisitioned winding up and appointment of a liquidator.
Operating Impact
The bank can no longer conduct banking business, accept deposits, or repay deposits except through the liquidation process. Depositors may seek reimbursement through DICGC up to the statutory ceiling of Rs 1,00,000, subject to usual terms and conditions. Winding-up and liquidation proceedings are to follow.
Regulatory Basis
- Section 35A of the Banking Regulation Act, 1949 (As Applicable to Cooperative Societies)
- Section 5(b) of the Banking Regulation Act, 1949 (As Applicable to Cooperative Societies)
Action Facts
- Primary Impact
- License cancellation
- Order Date
- 5 Sept 2008
- Effective From
- 5 Sept 2008
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank