Recorded RBI impact
License cancellation
License cancellation · Fresh imposition
Published by RBI
27 Oct 2008
Case Brief
RBI ordered the cancellation of the licence of Shri S.K.Patil Co-operative Bank Ltd., Kurundwad, District Kolhapur, Maharashtra, effective after close of business on October 25, 2008. The bank’s financial condition had deteriorated across successive inspections, RBI had already issued Section 35A directions restricting operations and capping withdrawals at Rs. 1,000, and a show-cause notice had been issued asking why the licence should not be cancelled. RBI said the bank had ceased to be solvent, revival efforts with the Government of Maharashtra had failed, and no viable turnaround plan existed. RBI therefore cancelled the licence in the interest of depositors and requested the Registrar of Co-operative Societies, Maharashtra to initiate winding up and appoint a liquidator. Consequent to cancellation, the bank cannot carry on banking business, including acceptance and repayment of deposits, and depositors’ repayment will proceed subject to deposit insurance terms and liquidation process.
Why RBI Acted
The Reserve Bank of India cancelled the licence of Shri S.K.Patil Co-operative Bank Ltd., Kurundwad, District Kolhapur, Maharashtra with effect after close of business on October 25, 2008. RBI stated that the bank had ceased to be solvent, its financial position had progressively worsened across inspections as of March 31, 2006, March 31, 2007 and March 31, 2008, and that all efforts to revive it in consultation with the Government of Maharashtra had failed. RBI had earlier issued directions under Section 35A of the Banking Regulation Act, 1949 (as applicable to co-operative societies), including a ceiling on deposit withdrawals of Rs. 1,000, and had also sought supersession of the board. After examining the bank’s reply to the show-cause notice, RBI concluded there was no viable revival plan and took the extreme step of cancelling the licence and initiating liquidation/winding-up proceedings, in the interest of depositors.
Operating Impact
The bank must stop all banking business, including accepting and repaying deposits, and liquidation/winding-up proceedings are to begin. Depositors will be repaid only to the extent available under the Deposit Insurance Scheme, up to the usual ceiling of Rs. 1,00,000 per depositor, subject to applicable terms and conditions.
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
- 6 Aug 2008
- Effective From
- 25 Oct 2008
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank