Recorded RBI impact
License cancellation
License cancellation · Fresh imposition
Published by RBI
23 Jun 2011
Case Brief
Reserve Bank of India cancelled the licence of Siddharth Sahakari Bank Ltd., Pune, Maharashtra, effective before commencement of business on June 14, 2011. RBI said the bank had ceased to be solvent, revival attempts in consultation with the Government of Maharashtra had failed, and depositors were facing continued uncertainty. The release records sharp deterioration in the bank’s financial condition, negative CRAR and net worth, erosion in deposits, default in CRR/SLR maintenance, severe liquidity problems, and statutory non-compliance. A show-cause notice was issued on April 6, 2011; the bank’s reply was not found satisfactory and no viable merger proposal was received. RBI also requested the Registrar of Co-operative Societies, Maharashtra to initiate winding up and appoint a liquidator. Upon liquidation, depositor repayment is subject to the DICGC ceiling and usual terms.
Why RBI Acted
RBI cancelled the banking licence of Siddharth Sahakari Bank Ltd., Pune, Maharashtra before commencement of business on June 14, 2011 because the bank had ceased to be solvent and efforts to revive it had failed. The release cites severe deterioration in financial health (negative CRAR, negative net worth, losses, erosion in deposits), default in maintaining CRR and SLR, heavy withdrawals causing liquidity crunch, and non-compliance with Sections 11(1), 18, 22(3)(a) & (b), and 24 of the Banking Regulation Act, 1949 (as applicable to co-operative societies). RBI also notes that the bank’s reply to the show-cause notice was unsatisfactory and that no concrete merger proposal was received.
Operating Impact
The bank cannot carry on banking business anymore and liquidation proceedings are to follow. Depositors will be paid subject to deposit insurance limits and liquidation terms, and the Registrar of Co-operative Societies was asked to wind up the bank and appoint a liquidator.
Regulatory Basis
- Section 35 A of the Banking Regulation Act, 1949 (AACS)
- Sections 11(1), 18, 22(3)(a) & (b) and 24 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
- 14 Jun 2011
- Effective From
- 14 Jun 2011
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank