Recorded RBI impact
License cancellation
License cancellation · Fresh imposition
Published by RBI
2 Mar 2007
Case Brief
The Reserve Bank of India cancelled the licence of Shri Kalmeshwar Urban Co-operative Bank Ltd., Hole-Alur, District Gadag, Karnataka, after finding that the bank had ceased to be solvent and that its financial position was precarious. RBI said efforts to revive the bank, undertaken in consultation with the Government of Karnataka, had failed, no viable revival plan existed, and the bank did not reply to the show-cause notice issued on November 14, 2006. RBI also noted that directions under Section 35A had earlier been issued on October 6, 2006 to protect depositors. Following the cancellation, RBI requisitioned the Registrar of Co-operative Societies, Karnataka, to initiate winding up and appoint a liquidator. The bank was thereafter prohibited from carrying on banking business, including accepting and repaying deposits, subject to liquidation and deposit insurance terms.
Why RBI Acted
RBI cancelled the banking licence of Shri Kalmeshwar Urban Co-operative Bank Ltd. after concluding that the bank had ceased to be solvent, its financial position as of March 31, 2006 was precarious, efforts to revive it had failed, and the chances of revival were remote. A show-cause notice issued on November 14, 2006 was not replied to despite reminders. RBI had earlier issued directions under Section 35A of the Banking Regulation Act, 1949 (as applicable to cooperative societies) on October 6, 2006 to protect depositors' interests. The cancellation was ordered as a final step and the Commissioner for Co-operation and Registrar of Co-operative Societies, Karnataka was requisitioned to wind up the bank and appoint a liquidator.
Operating Impact
The bank can no longer carry on banking business, and liquidation proceedings will begin. Depositors will have claims processed under the deposit insurance scheme, subject to its limits and conditions, with repayment up to Rs 1,00,000 per depositor from DICGC under usual terms and conditions.
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
- 28 Feb 2007
- Effective From
- 28 Feb 2007
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank