Recorded RBI impact
License cancellation
License cancellation · Fresh imposition
Published by RBI
5 May 2015
Case Brief
The Reserve Bank of India cancelled the banking licence of Shri Swami Samarth Urban Co-operative Bank Ltd., Naldurg, Osmanabad, with effect from the close of business on April 30, 2015. RBI said the bank’s financial position was precarious, there was no scope for revival, and the bank had failed to comply with statutory requirements under Sections 11(1) and 22(3)(a) of the Banking Regulation Act, 1949 (AACS). RBI further observed that the bank was unable to pay present and future depositors in full, its affairs were detrimental to depositor interests, and continuation of banking business would harm public interest. Following cancellation, the Registrar of Co-operative Societies, Maharashtra was requested to order winding up and appoint a liquidator, and deposit repayment proceedings under the DICGC Act were to begin, subject to the usual ceiling of Rs.1,00,000 per depositor.
Why RBI Acted
RBI cancelled the licence of Shri Swami Swami Samarth Urban Co-operative Bank Ltd., Naldurg, Osmanabad, after finding that the bank’s financial position had further deteriorated and there was no viable prospect of revival, either on its own or with outside support. The bank did not comply with Section 11(1) and Section 22(3)(a) of the Banking Regulation Act, 1949 (AACS): it lacked the required minimum capital and reserves and did not have adequate assets to meet its outside liabilities. RBI also noted that the bank was not in a position to repay present and future depositors in full, that its affairs were being conducted in a manner detrimental to depositor interests, and that public interest would be adversely affected if it were allowed to continue banking business. A show-cause notice had been issued earlier, but the response was found unsatisfactory and supervisory concerns remained unaddressed.
Operating Impact
With the licence cancelled, the bank must stop banking business immediately and move into liquidation. Depositors will be paid through the DICGC process up to the statutory ceiling of Rs.1,00,000 per depositor, and the Registrar is expected to initiate winding up and appoint a liquidator.
Regulatory Basis
- Section 11(1) of the Banking Regulation Act, 1949 (AACS)
- Section 22(3)(a) of the Banking Regulation Act, 1949 (AACS)
- Section 35A of the Banking Regulation Act
- Section 35 of the Banking Regulation (BR) Act, 1949 (AACS)
- Section 5(b) of the Banking Regulation Act, 1949 (AACS)
Action Facts
- Primary Impact
- License cancellation
- Order Date
- 9 Dec 2014
- Effective From
- 30 Apr 2015
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank