Recorded RBI impact
License cancellation
License cancellation · Fresh imposition
Published by RBI
14 Oct 2013
Case Brief
The Reserve Bank of India cancelled the licence of Shri Siddhi Vinayak Nagari Sahakari Bank Ltd., Rasayani, Raigad district, Maharashtra, after concluding that the bank had ceased to be solvent, could not pay present and future depositors, and that its affairs had been conducted detrimentally to depositor interests. RBI noted non-compliance with sections 11(1), 22(3)(a) and 22(3)(b) of the BR Act, 1949 (AACS), persistent deterioration in financial health, and no realistic scope for revival. The bank’s licence cancellation took effect from the close of business on September 25, 2013, and the Registrar of Co-operative Societies, Maharashtra was asked to initiate winding-up and appoint a liquidator. The release also recounts earlier supervisory findings such as high NPAs, accounting manipulations, CRR/SLR defaults, violations of lending norms, creation of a floating charge without RBI approval, and an outstanding fraud case. RBI had earlier imposed all-inclusive directions and penal charges, and had issued a show-cause notice before taking this final action.
Why RBI Acted
The bank had ceased to be solvent and repeated revival efforts failed. RBI found that the bank was not in a position to pay its present and future depositors, its affairs were being conducted in a manner detrimental to depositors, it did not comply with sections 11(1), 22(3)(a) and 22(3)(b) of the BR Act, 1949 (AACS), and its financial position left little scope for revival. The release also notes prior supervisory concerns including high and worsening NPAs, accounting manipulations, defaults in CRR/SLR maintenance, violation of single borrower and unsecured-loan norms, floating charge creation without RBI approval, and failure to initiate action in a fraud case. On these grounds, RBI cancelled the bank’s licence under section 22 of the BR Act, 1949 (AACS) and the bank was directed into liquidation; a penal interest amount of Rs 21,97,768 was also mentioned as unpaid, but the operative action is the licence cancellation.
Operating Impact
From the effective date, the bank can no longer carry on banking business and will proceed into liquidation. Depositors will have their claims settled subject to the Deposit Insurance and Credit Guarantee Corporation scheme, with insurance protection up to Rs 1,00,000 per depositor under the usual terms and conditions.
Regulatory Basis
- section 22 of the BR Act, 1949 (AACS)
- section 5(b) of the BR Act, 1949 (AACS)
- Section 35 of the BR Act, 1949 (AACS)
- section 14A of the B.R.Act, 1949 (AACS)
- section 11(1) of the BR Act, 1949 (AACS)
- section 22(3)(a) of the BR Act, 1949 (AACS)
- section 22(3)(b) of the BR Act, 1949 (AACS)
Action Facts
- Primary Impact
- License cancellation
- Order Date
- 25 Sept 2013
- Effective From
- 25 Sept 2013
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank