Recorded RBI impact
License cancellation
License cancellation · Fresh imposition
Published by RBI
22 Jun 2009
Case Brief
The Reserve Bank of India cancelled the licence of The Akot Urban Co-operative Bank Ltd., Akot, Maharashtra, after finding that the bank had ceased to be solvent, had negative net worth, and that revival attempts had failed. A statutory inspection found violations of provisions of the Banking Regulation Act, 1949 (as applicable to cooperative societies) and RBI guidelines/instructions. RBI had earlier placed the bank under Section 35A directions prohibiting it from incurring any liability, and later issued a show-cause notice; the reply was not accepted. Consequent to the cancellation, RBI requested winding-up proceedings and stated that the bank is prohibited from carrying on banking business, including acceptance and repayment of deposits.
Why RBI Acted
RBI cancelled the licence of The Akot Urban Co-operative Bank Ltd., Akot (Maharashtra) after concluding that the bank had ceased to be solvent, its realizable paid-up capital and reserves were negative, and the chances of revival were remote without a viable action plan. The statutory inspection with reference to financial position as on March 31, 2008 found non-compliance with several provisions of the Banking Regulation Act, 1949 (as applicable to cooperative societies) and violations of several RBI guidelines/instructions. The bank had also been placed under Section 35A directions on January 1, 2009 precluding it from incurring any liability, and its show-cause reply against cancellation was found unacceptable. RBI also requested the Registrar of Co-operative Societies, Maharashtra to initiate winding up and appoint a liquidator.
Operating Impact
The bank can no longer conduct banking business, including accepting or repaying deposits, and liquidation proceedings are to commence. Depositors will receive insurance-covered repayment up to Rs. 1,00,000 per depositor from DICGC, subject to liquidation and claim processing.
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
- 20 Jun 2009
- Effective From
- 20 Jun 2009
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank