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Shree Vardhaman Co-operative Bank Ltd., Bhavnagar

Co-operative bankBhavnagar, 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

21 Nov 2008

Case Brief

The Reserve Bank of India cancelled the licence of Shree Vardhaman Co-operative Bank Ltd., Bhavnagar, effective after close of business on November 20, 2008. RBI said the bank had ceased to be solvent, its financial condition had deteriorated further after earlier inspection findings, and all efforts to revive it in consultation with the Government of Gujarat had failed. The bank had also been issued Section 35A directions restricting operations from November 20, 2006. RBI concluded that the bank had no viable revival plan and that the possibility of turnaround was remote, so it took the extreme step of cancelling the licence in the interest of depositors. RBI requested the Registrar of Co-operative Societies, Gujarat to order winding up and appoint a liquidator.

Why RBI Acted

Capital & exposure normsGovernance oversight

RBI cancelled the licence of Shree Vardhaman Co-operative Bank Ltd., Bhavnagar after concluding that the bank had ceased to be solvent, its financial position had become precarious, and efforts to revive it in consultation with the Government of Gujarat had failed. The bank had earlier been placed under Section 35A directions restricting operations. RBI also noted that the bank did not have a viable plan of action for revival and that, in the absence of a workable turnaround plan to meet regulatory prescriptions, revival was remote. The cancellation was taken in the interest of depositors, and RBI requested the Registrar of Co-operative Societies, Gujarat to initiate winding-up and appoint a liquidator.

Operating Impact

The bank can no longer carry on banking business, including accepting or repaying deposits. Liquidation proceedings will begin, and depositors may claim repayment up to the DICGC insurance ceiling of Rs. 1,00,000, subject to the scheme’s terms and conditions. Affected parties include the bank’s depositors and the liquidator/winding-up authority.

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
20 Nov 2008
Effective From
20 Nov 2008
Entities Affected
1
Entity Role
Primary
Entity Type
Co-operative bank