Recorded RBI impact
License cancellation
License cancellation · Fresh imposition
Published by RBI
8 Sept 2009
Case Brief
The Reserve Bank of India cancelled the licence of Surendranagar Peoples Co-operative Bank Ltd., Surendranagar, Gujarat after business on September 4, 2009. RBI said the bank had ceased to be solvent, its affairs were being conducted detrimentally to the interests of depositors, and depositors were facing continued uncertainty. Earlier statutory inspections indicated impaired financial position and violations of RBI directives and guidelines, while subsequent inspections in 2006, 2007 and 2008 showed further deterioration. A show-cause notice dated January 1, 2009 was issued, but the reply was not satisfactory. RBI also requested the Registrar of Co-operative Societies, Gujarat to initiate winding up and appoint a liquidator. Following cancellation, the bank was prohibited from carrying on banking business, including acceptance and repayment of deposits; depositors would be dealt with under the Deposit Insurance and Credit Guarantee Corporation scheme up to Rs. 1,00,000 per depositor.
Why RBI Acted
RBI cancelled the licence of Surendranagar Peoples Co-operative Bank Ltd., Surendranagar after concluding that the bank had ceased to be solvent, its affairs were being conducted in a manner detrimental to the interests of depositors, and depositors were being inconvenienced by continued uncertainty. The release says statutory inspections showed impaired financial position and violations of RBI directives and guidelines, and later inspections in 2006, 2007 and 2008 showed further deterioration. A show-cause notice issued on January 1, 2009 did not elicit a satisfactory reply, leading RBI to take the extreme step of cancelling the banking licence and initiating liquidation proceedings.
Operating Impact
The bank can no longer conduct banking business, accept deposits, or repay deposits except through liquidation/insurance processes. Depositors will rely on DICGC coverage up to Rs. 1,00,000 subject to usual terms and conditions, and winding-up/liquidation proceedings are to begin.
Regulatory Basis
- Section 5(b) of the Banking Regulation Act, 1949 (AACS)
Action Facts
- Primary Impact
- License cancellation
- Order Date
- 4 Sept 2009
- Effective From
- 4 Sept 2009
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank