Recorded RBI impact
License cancellation
License cancellation · Fresh imposition
Published by RBI
22 Jul 2009
Case Brief
The Reserve Bank of India cancelled the licence of Shri Parola Urban Co operative Bank Ltd., Parola, District Jalgaon, Maharashtra with effect after close of business on July 10, 2009. RBI said the bank had ceased to be solvent, repeated supervisory inspections showed its financial position had progressively worsened, and all revival efforts in consultation with the Government of Maharashtra had failed. The bank had also been issued directions under Section 35A of the Banking Regulation Act, 1949 restricting its operations, and after a show-cause notice, RBI found no viable turnaround plan or prospect of meeting regulatory prescriptions. RBI requested the Registrar of Co-operative Societies, Maharashtra to order winding up and appoint a liquidator. Upon cancellation and liquidation, the bank is prohibited from carrying on banking business, including accepting and repaying deposits, and depositors may seek repayment subject to DICGC limits and terms.
Why RBI Acted
Reserve Bank cancelled the licence of Shri Parola Urban Co operative Bank Ltd. after concluding that the bank had ceased to be solvent, efforts to revive it in consultation with the Government of Maharashtra had failed, and depositors were being inconvenienced by continuing uncertainty. RBI noted that inspections as of March 31, 2006, March 31, 2007, and March 31, 2008 showed worsening financial condition, that directions under Section 35A of the Banking Regulation Act, 1949 had already been issued restricting operations, and that the bank failed to provide any viable plan for revival in response to the show-cause notice. The cancellation was taken in the interest of depositors, with liquidation proceedings to follow.
Operating Impact
The bank can no longer conduct banking business, including accepting or repaying deposits. Liquidation proceedings are to begin, and depositors will be paid subject to DICGC insurance limits and conditions; other stakeholders are affected by the winding-up process and the cessation of normal operations.
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
- 10 Jul 2009
- Effective From
- 10 Jul 2009
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank