Recorded RBI impact
License cancellation
License cancellation · Fresh imposition
Published by RBI
20 Aug 2008
Case Brief
The Reserve Bank of India cancelled the licence of The Anubhav Co-operative Bank Ltd., Basavakalyan, Karnataka after determining that the bank had ceased to be solvent and that revival efforts undertaken in consultation with the Government of Karnataka had failed. RBI said the action was taken in the interest of depositors, noting that a statutory inspection had revealed severe deterioration in the bank’s financial position, 73.6% erosion of deposits, severe liquidity problems, heavy borrowing, and inability to meet all depositor commitments. The bank had earlier been placed under Section 35A directions on January 23, 2008, restricting its operations and capping withdrawals at Rs.500 per depositor. Following the cancellation, the Registrar of Co-operative Societies, Karnataka was asked to initiate winding up and appoint a liquidator; the bank is prohibited from carrying on banking business, including acceptance and repayment of deposits.
Why RBI Acted
RBI cancelled the licence of The Anubhav Co-operative Bank Ltd., Basavakalyan, Karnataka after concluding that the bank had ceased to be solvent and that all efforts to revive it in consultation with the Government of Karnataka had failed. A statutory inspection showed sharp deterioration in financial condition compared with the previous inspection, deposits eroded by 73.6%, severe liquidity problems, heavy borrowing during the year, and inability to meet all commitments to depositors. The bank had earlier been placed under Section 35A directions on January 23, 2008, restricting operations and capping withdrawals at Rs.500 per depositor, and a show-cause notice was issued on February 8, 2008 before the licence was finally cancelled in the interest of depositors. The Registrar of Co-operative Societies, Karnataka was requested to initiate winding up and appoint a liquidator.
Operating Impact
The bank can no longer carry on banking business, including accepting or repaying deposits. Liquidation proceedings are to follow, and eligible depositors will be paid insurance coverage up to Rs.1,00,000 from DICGC, subject to the liquidation process.
Regulatory Basis
- Section 35A of the Banking Regulation Act 1949(AACS)
- Section 5(b) of the Banking Regulation Act, 1949(AACS)
Action Facts
- Primary Impact
- License cancellation
- Order Date
- 14 Aug 2008
- Effective From
- 14 Aug 2008
- Entities Affected
- 1
- Entity Role
- Primary
- Entity Type
- Co-operative bank