Recorded RBI impact
License cancellation
License cancellation · Fresh imposition
Published by RBI
17 Dec 2008
Case Brief
The Reserve Bank of India cancelled the banking licence of Shri Siddhi Venkatesh Sahakari Bank Ltd., Jalgaon, Maharashtra after concluding that the bank had ceased to be solvent and that revival efforts had failed. RBI noted that inspections showed the bank's financial position was impaired and later deteriorated further, and that the bank had no viable plan of action for revival. The bank had earlier been placed under Section 35A directions restricting operations, including a cap of Rs. 1,000 on withdrawals. Following the cancellation, RBI requested the Registrar of Co-operative Societies, Maharashtra to issue a winding-up order and appoint a liquidator. The bank is prohibited from carrying on banking business, including acceptance and repayment of deposits, and deposit repayment will proceed under the DICGC scheme subject to its limits and conditions.
Why RBI Acted
RBI cancelled the banking licence of Shri Siddhi Venkatesh Sahakari Bank Ltd., Jalgaon, Maharashtra because the bank had ceased to be solvent, efforts to revive it in consultation with the Government of Maharashtra had failed, and the depositors were being inconvenienced by continued uncertainty. The release says statutory inspections showed the bank's financial position was impaired as of March 31, 2006 and further deteriorated by March 31, 2007. RBI had earlier issued directions under Section 35A on May 12, 2008 restricting operations, including a ceiling of Rs. 1,000 on withdrawal of deposits, and issued a show-cause notice on the same date. After examining the reply, RBI concluded there was no viable plan for revival and that the possibility of turning the bank around was remote, so it took the extreme measure of cancelling the licence. The Registrar of Co-operative Societies, Maharashtra was requested to initiate winding up and appoint a liquidator.
Operating Impact
The bank can no longer conduct banking business or accept/repay deposits, and liquidation proceedings are to begin. Depositors will have claims handled through the DICGC framework, subject to the insurance ceiling and applicable 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 Dec 2008
- Effective From
- 6 Dec 2008
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank