Recorded RBI impact
License cancellation
License cancellation · Fresh imposition
Published by RBI
11 Jan 2010
Case Brief
The Reserve Bank of India cancelled the licence of The Ahmedabad Peoples’ Co-operative Bank Ltd., Ahmedabad (Gujarat), Ahmedabad, with effect after the close of business on January 08, 2010. RBI said the bank had ceased to be solvent, revival efforts in consultation with the Government of Gujarat had failed, and the situation was causing continued inconvenience and uncertainty for depositors. The release further notes that a snap scrutiny in May 2007 had revealed violations of RBI directives/instructions/guidelines on conduct of insurance business and exposure ceiling, and that statutory inspections as of March 31, 2008 and March 31, 2009 showed the financial position had deteriorated and become precarious. The bank had already been placed under directions on May 13, 2009, and after a show-cause notice dated October 06, 2009, RBI found no viable plan for revival. RBI therefore cancelled the licence and requested the Registrar of Co-operative Societies, Gujarat to order winding up and appoint a liquidator.
Why RBI Acted
RBI cancelled the banking licence of The Ahmedabad Peoples’ Co-operative Bank Ltd., Ahmedabad (Gujarat), effective after close of business on January 08, 2010, because the bank had ceased to be solvent, revival attempts in consultation with the Government of Gujarat had failed, and depositor interests were being affected by continued uncertainty. The release says a snap scrutiny in May 2007 found violations of RBI directives/instructions/guidelines relating to conduct of insurance business and exposure ceiling, and later statutory inspections as of March 31, 2008 and March 31, 2009 showed deterioration and a precarious financial position. RBI had already placed the bank under directions from May 13, 2009, issued a show-cause notice on October 06, 2009, and concluded there was no viable revival plan, so it took the extreme step of cancelling the licence and initiating liquidation.
Operating Impact
The bank cannot carry on banking business, including acceptance and repayment of deposits. Liquidation proceedings will start, and depositors will be able to seek repayment subject to the Deposit Insurance and Credit Guarantee Corporation scheme, up to the applicable ceiling and terms. The action directly affects the bank and its depositors.
Regulatory Basis
- Section 5(b) of the Banking Regulation Act, 1949 (AACS)
Action Facts
- Primary Impact
- License cancellation
- Order Date
- 8 Jan 2010
- Effective From
- 13 May 2009
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank