Recorded RBI impact
License cancellation
License cancellation · Fresh imposition
Published by RBI
12 Nov 2009
Case Brief
The Reserve Bank of India cancelled the licence of Shri Kamdar Sahakari Bank Ltd., Bhavnagar, after concluding that the bank had ceased to be solvent and could not be revived despite efforts made in consultation with the Government of Gujarat. RBI noted that statutory inspections showed the bank’s financial position had first become impaired and then precarious, and that the bank had already been placed under directions from July 10, 2009 because of liquidity problems. After issuing a show-cause notice and examining the reply, RBI found no viable turnaround plan or means to meet regulatory requirements. The order was issued after the close of business on November 06, 2009, and the Registrar of Co-operative Societies, Gujarat was requested to start winding-up and appoint a liquidator.
Why RBI Acted
RBI cancelled the banking licence of Shri Kamdar Sahakari Bank Ltd., Bhavnagar after finding that the bank had ceased to be solvent, its financial condition had deteriorated and become precarious, and efforts to revive it in consultation with the Government of Gujarat had failed. A statutory inspection as of March 31, 2008 showed impaired financial position, and a later inspection as of March 31, 2009 showed further deterioration. The bank had been placed under directions from July 10, 2009 due to its precarious financial position and liquidity crunch, and a show-cause notice was issued on July 23, 2009. RBI found no viable plan of action or means to meet regulatory prescriptions, so it took the extreme step of cancelling the licence and initiating liquidation proceedings.
Operating Impact
The bank can no longer carry on banking business, including accepting or repaying deposits. Liquidation proceedings will begin, and depositors will be paid subject to the Deposit Insurance Scheme, up to the applicable DICGC limit of Rs. 1,00,000 per depositor under usual terms and conditions.
Regulatory Basis
- Section 5(b) of the Banking Regulation Act, 1949 (AACS)
Action Facts
- Primary Impact
- License cancellation
- Order Date
- 6 Nov 2009
- Effective From
- 10 Jul 2009
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank