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The Sarvodaya Nagrik Sahakari Bank Ltd, Visnagar, Gujarat

Co-operative bankVisnagar, Gujarat

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

7 Feb 2007

Case Brief

The Reserve Bank of India cancelled the licence of The Sarvodaya Nagrik Sahakari Bank Ltd., Visnagar, Gujarat, on February 02, 2007. RBI said the bank had ceased to be solvent, revival attempts in consultation with the Government of Gujarat had failed, and the bank’s precarious financial position had worsened despite being under Section 35A directions since January 03, 2004. An inspection as of March 31, 2006 showed deterioration in financial condition, erosion of deposits, and negative realisable value of paid-up capital and reserves. After a show-cause notice dated November 13, 2006 and finding no viable revival plan, RBI took the extreme step of cancelling the licence and requested the Registrar of Co-operative Societies, Gujarat to wind up the bank and appoint a liquidator. The release also notes that depositors would be eligible for insurance cover up to Rs. 1,00,000 under DICGC in liquidation.

Why RBI Acted

Governance oversightCapital & exposure normsCustomer protection

RBI cancelled the licence of Sarvodaya Nagrik Sahakari Bank Ltd., Visnagar, Gujarat, after concluding that the bank had ceased to be solvent, its financial condition had deteriorated, and revival efforts in consultation with the Government of Gujarat had failed. The release says the bank was under Section 35A directions from January 03, 2004 due to a severe liquidity crunch, an inspection as of March 31, 2006 showed further deterioration, deposits were getting eroded, paid-up capital and reserves were negative, and the bank had no viable revival plan. A show-cause notice was issued on November 13, 2006, and the licence was ultimately cancelled on February 02, 2007 to protect depositors' interests; liquidation and winding-up were also initiated.

Operating Impact

The bank can no longer carry on banking business, including acceptance and repayment of deposits, and liquidation proceedings are to begin. Depositors will receive insured amounts up to the DICGC ceiling, and a liquidator is to be appointed to wind up the bank.

Regulatory Basis

  • Section 35A of the Banking Regulation Act, 1949(AACS)
  • Section 5(b) of the Banking Regulation Act, 1949 (AACS)

Action Facts

Primary Impact
License cancellation
Order Date
2 Feb 2007
Effective From
3 Jan 2004
Entities Affected
1
Entity Role
Primary
Entity Type
Co-operative bank