Recorded RBI impact
License cancellation
License cancellation · Fresh imposition
Published by RBI
19 Jun 2014
Case Brief
RBI cancelled the banking licence of Shri Shivaji Sahakari Bank Ltd., Gadhinglaj, Kolhapur (Maharashtra) with effect from the close of business on June 14, 2014. The regulator said the bank had ceased to be solvent, revival efforts in consultation with the Government of Maharashtra had failed, and continued uncertainty was inconveniencing depositors. The release details severe financial deterioration over multiple inspections, repeated CRR/SLR defaults, erosion of deposits, negative net worth and CRAR, high NPAs, unauthorised lending contrary to RBI instructions, and deficiencies in book-keeping and controls. RBI had earlier placed the bank under all-inclusive directions under Section 35A, later extended them, issued show-cause notices, and ultimately found the responses unsatisfactory, leading to licence cancellation and liquidation proceedings.
Why RBI Acted
RBI cancelled the licence granted on January 6, 1995 under Section 22 of the Banking Regulation Act after concluding that Shri Shivaji Sahakari Bank Ltd. had ceased to be solvent, revival attempts in consultation with the Government of Maharashtra had failed, and the bank’s continued uncertainty was inconveniencing depositors. The release also records a long history of financial deterioration: rising NPAs, negative net worth/CRAR, repeated CRR/SLR defaults, erosion of deposits, unauthorised lending in breach of RBI operational instructions, unbalanced books, unreconciled inter-branch entries, and other governance/control failures. RBI had earlier issued all-inclusive directions under Section 35A, later extended, and then issued show-cause notices seeking cancellation and liquidation; the bank’s replies were not found satisfactory.
Operating Impact
The bank cannot carry on banking business from the effective date, and liquidation proceedings are to begin. Depositors will be able to claim insured deposits up to the DICGC limit subject to the scheme’s terms and conditions, while other creditors and stakeholders are affected by the winding-up process.
Regulatory Basis
- section 35 A of the BR Act
- Section 22 of the Act
- section 5(b) of the Act
- Sections 11(1), 22(3)(a) and 22(3)(b) of the Act
Action Facts
- Primary Impact
- License cancellation
- Order Date
- 28 Jan 2014
- Effective From
- 14 Jun 2014
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank