Recorded RBI impact
License cancellation
License cancellation · Fresh imposition
Published by RBI
15 Jun 2006
Case Brief
The Reserve Bank of India cancelled the licence of Shriram Sahakari Bank Ltd., Nashik, Maharashtra on June 13, 2006, after concluding that the bank had ceased to be solvent and that all revival attempts had failed. RBI noted that inspection of the bank showed an unsatisfactory and later deteriorating financial position, erosion of deposits, negative realizable value of capital and reserves, violation of earlier RBI directions, and gross mismanagement that had already led to supersession of the board. The bank had also been issued a show-cause notice before the cancellation. RBI requested the Registrar of Co-operative Societies, Maharashtra to initiate winding up and appoint a liquidator, and stated that deposit repayment would proceed subject to DICGC terms and conditions.
Why RBI Acted
RBI cancelled the licence of Shriram Sahakari Bank Ltd., Nashik, Maharashtra after concluding that the bank had ceased to be solvent, revival efforts in consultation with the Government of Maharashtra had failed, and the depositors were facing continued uncertainty. The release states that inspection revealed an unsatisfactory financial position, later deterioration, erosion of deposits, negative realizable value of paid-up capital and reserves, violation of RBI directions dated October 25, 2004, and gross mismanagement leading to supersession of the board. RBI had earlier issued a show-cause notice on November 10, 2005. The cancellation was taken as a final step in the interests of depositors and was accompanied by initiation of liquidation proceedings.
Operating Impact
The bank can no longer carry on banking business, including accepting or repaying deposits, and liquidation proceedings are to begin. Depositors will have claims processed under the deposit insurance scheme, subject to the applicable ceiling and conditions.
Regulatory Basis
- Section 35 A of the Banking Regulation Act, 1949
- Section 5(b) of the Banking Regulation Act, 1949 (AACS)
Action Facts
- Primary Impact
- License cancellation
- Order Date
- 13 Jun 2006
- Effective From
- 13 Jun 2006
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank