Recorded RBI impact
License cancellation
License cancellation · Fresh imposition
Published by RBI
11 Nov 2008
Case Brief
The Reserve Bank of India cancelled the licence of The Achalpur Urban Co-operative Bank Ltd., Amravati, Maharashtra, after determining that the bank had ceased to be solvent, had negative realizable capital and reserves, and had not complied with several provisions of the Banking Regulation Act, 1949 and RBI guidelines/instructions. RBI had already placed the bank under Section 35A directions barring it from incurring liabilities, and it had issued a show-cause notice under Section 22 asking why the licence should not be cancelled. The bank’s reply was found unacceptable, and RBI concluded that revival prospects were remote in the absence of a viable action plan. RBI also requested the Registrar of Co-operative Societies, Maharashtra to issue winding-up orders and appoint a liquidator. Consequent to the cancellation, the bank is prohibited from carrying on banking business, including acceptance and repayment of deposits, and depositors will be eligible for insured repayment up to the DICGC limit.
Why RBI Acted
RBI cancelled the licence of The Achalpur Urban Co-operative Bank Ltd., Amravati, after concluding that the bank had ceased to be solvent, had negative realizable capital and reserves (net worth), was not complying with several provisions of the Banking Regulation Act, 1949 (as applicable to co-operative societies), and had violated several RBI guidelines/instructions. RBI had earlier placed the bank under Section 35A directions precluding it from incurring any liability, issued a show-cause notice under Section 22, and found the reply unacceptable. With no viable action plan and remote chances of revival, RBI took the extreme measure of cancelling the licence and requested the Registrar of Co-operative Societies, Maharashtra to initiate winding up and appoint a liquidator.
Operating Impact
The bank must stop banking business and enter liquidation proceedings. Depositors will have their claims processed through liquidation, with insured repayment up to Rs 1,00,000 per depositor under DICGC, while the Registrar of Co-operative Societies is expected to initiate winding up and appoint a liquidator.
Regulatory Basis
- Section 35A of the Banking Regulation Act 1949 (As Applicable to Cooperative Societies)
- Section 22 of the Banking Regulation Act, 1949(As Applicable to Cooperative Societies)
- Section 5(b) of the Banking Regulation Act, 1949(As Applicable to Cooperative Societies)
Action Facts
- Primary Impact
- License cancellation
- Order Date
- 4 Nov 2008
- Effective From
- 4 Nov 2008
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank